International Trade and Strategic Privatization

Juan Carlos Bárcena‐Ruiz and María Begoña Garzón
Authors registered in the RePEc Author Service: Juan Carlos Bárcena-Ruiz

Review of Development Economics, 2005, vol. 9, issue 4, 502-513

Abstract: The literature on mixed oligopoly does not consider the strategic interaction between governments when they decide whether to privatize their publicly‐owned firms. In order to analyze this question, we consider two countries and assume that publicly‐owned firms are less efficient than private firms. We obtain that when the marginal cost of the publicly‐owned firms takes an intermediate value, each government wants it to be the government of the other country that privatizes its publicly‐owned firm. In this case, only one government privatizes, and that government obtains lower social welfare and producer surplus than the other.

Date: 2005
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