Flexible Privatization Policy in Free-Entry Markets

Susumu Sato and Toshihiro Matsumura

MPRA Paper from University Library of Munich, Germany

Abstract: We investigate a mixed oligopoly in a free-entry market in the presence of shadow cost of public funding. The government chooses the degree of privatization before the entry of private firms and then adjusts the degree of privatization after the entry. We show that a pre-entry privatization policy may serve as a commitment device if the foreign ownership share of private firms is moderate, and substitutes the ideal privatization policy with complete commitment if the equilibrium pre-entry privatization policy is partial privatization.

Keywords: Shadow cost of public funds; free entry; state-owned public enterprises; foreign competition; time inconsistency (search for similar items in EconPapers)
JEL-codes: H42 L33 (search for similar items in EconPapers)
Date: 2018-08-13
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