PRIVATIZATION AND EFFICIENCY GAIN IN AN INTERNATIONAL MIXED OLIGOPOLY WITH ASYMMETRIC COSTS*

Leonard Wang (), Ya‐chin Wang and Lihong Zhao

The Japanese Economic Review, 2009, vol. 60, issue 4, 539-559

Abstract: This paper examines two policy instruments, privatization of the domestic public firm and imposition of a tariff on foreign private firms in an international mixed oligopolistic model with asymmetric costs. It first demonstrates that different orders of moves of firms will imply different government decisions on optimal tariff and on privatization policy. Following Hamilton and Slutsky (1990), this paper then uses an extended game to discuss endogenous roles. It indicates that the efficiency gain that highlights the importance of foreign competition is crucial in determining the welfare improving privatization policy. Moreover, the endogenous equilibria are associated with different government decisions on privatization.

Date: 2009
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