Privatization Neutrality Theorem in Free Entry Markets With Efficiency Gap

Yoshihiro Tomaru, Leonard F. S. Wang and Haoxiang Qi

Scottish Journal of Political Economy, 2025, vol. 72, issue 3

Abstract: This paper explores the effects of privatization and subsidization policies in a mixed oligopoly, consisting of one semipublic firm and multiple private firms, where partial privatization affects technological disparity. The analysis shows that privatization can be either insufficient or excessive in reducing the efficiency gap, depending on market structure (restricted or free entry) and available policy tools. In cases of free entry with a combination of privatization and subsidization, privatization may become excessive. Additionally, technological differences prevent achieving the first‐best outcome, which contrasts with prior literature's findings on the subject.

Date: 2025
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https://doi.org/10.1111/sjpe.70004

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Persistent link: https://EconPapers.repec.org/RePEc:bla:scotjp:v:72:y:2025:i:3:n:e70004

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