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How much should you own? Cross-ownership and privatization

Rupayan Pal

Indira Gandhi Institute of Development Research, Mumbai Working Papers from Indira Gandhi Institute of Development Research, Mumbai, India

Abstract: This paper investigates the effects of cross-ownership on optimal privatization, and vice-versa, in mixed duopoly. It shows that cross-ownership is profitable to the private firm only if the level of privatization of the public firm is sufficiently high. In equilibrium, cross-ownership does not take place even if there is partial privatization. However, the possibility of cross-ownership significantly limits the socially optimal level of privatization in most of the situations. Moreover, it demonstrates that full nationalization is socially optimal, in case of sufficiently convex identical cost functions and homogeneous goods. These results have strong implications to both divestment and competition policies.

Keywords: Cross-ownership; mixed duopoly; partial privatization; product differentiation (search for similar items in EconPapers)
JEL-codes: D43 H42 L13 L32 (search for similar items in EconPapers)
Pages: 37 pages
Date: 2012-03
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Working Paper: How much should you own? Cross-ownership and privatization (2010) Downloads
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