Privatization Neutrality Theorem in Free Entry Markets

Toshihiro Matsumura and Yasunori Okumura

The B.E. Journal of Theoretical Economics, 2017, vol. 17, issue 2, 9

Abstract: It is known that if the number of entering firms is endogenous (free entry markets), privatization is not necessarily welfare neutral in mixed oligopolies under a uniform production subsidy policy. We revisit this problem by considering another policy tool, the output floor regulation. We investigate three free entry models with different time structures, a Cournot and two Stackelberg models. We find that neutrality is restored in free entry markets under the optimal output floor regulation, regardless of the time structure.

Keywords: endogenous market structure; minimum quantity regulation; mixed oligopolies; Stackelberg; Cournot; irrelevance results (search for similar items in EconPapers)
JEL-codes: H42 L13 (search for similar items in EconPapers)
Date: 2017
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Citations: View citations in EconPapers (8)

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DOI: 10.1515/bejte-2015-0130

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