Public Enterprise Strategies in a Market Open to Domestic and International Competition

Mehrdad Sepahvand

Annals of Economics and Statistics, 2004, issue 75-76, 135-153

Abstract: The emerging literature on interaction between strategic trade theory and mixed oligopoly uses a simple example to argue that if the domestic market is open to foreign competition and the government uses a production subsidy then it is socially preferable to privatise the domestic public enterprise even if it is just as efficient as its private counterparts. This study evaluates the robustness of this result by extending it to a general framework. Furthermore, it argues that allocative efficiency gains attributed to privatisation may also be explained by giving the public enterprise a first mover advantage (as a Stackelberg leader). Thus it suggests it is the timing of the game rather than the ownership structure which is responsible for the inefficiency associated with the presence of a public enterprise in a market open to international competition.

Date: 2004
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Citations: View citations in EconPapers (19)

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Persistent link: https://EconPapers.repec.org/RePEc:adr:anecst:y:2004:i:75-76:p:135-153

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