Privatization and Efficiency in a Differentiated Industry

André Jean-Louis de Palma () and Jacques François Thisse ()
Authors registered in the RePEc Author Service: Simon Anderson ()

No 1136, CEPR Discussion Papers from C.E.P.R. Discussion Papers

Abstract: We consider a market in which a public firm competes against private firms, and ask what happens when the public firm is privatized. In the short run, privatization is harmful because all prices rise; the disciplinary role of the public firm is lost. In the long run, privatization leads to further entry; the net effect is beneficial if consumer preference for variety is not too weak. A sufficient statistic for welfare to be higher in the long run, is that the public firm makes a loss. Profitable firms should not be privatized, in contrast with frequent practice.

Keywords: Mixed Oligopoly; Privatization; Product Differentiation (search for similar items in EconPapers)
JEL-codes: L13 L33 (search for similar items in EconPapers)
Date: 1995-03
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Related works:
Journal Article: Privatization and efficiency in a differentiated industry (1997)
Working Paper: Privatization and Efficiency in a Differentiated Industry (1996)
Working Paper: Privatization and Efficiency in a Differentiated Industry (1995)
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