Privatizing Multi-subsidiary Public Firm in Location Model

Chen Jingliang () and Jie Shuai
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Chen Jingliang: Deloitte Enterprise Consulting (Shanghai) Co., Ltd., 21F Bund Center 222 Yanan Road East, Shanghai200000, P.R. China.

The B.E. Journal of Theoretical Economics, 2019, vol. 19, issue 1, 14

Abstract: This paper examines a different way of privatization from existing literature. In a mixed duopoly Hotelling type model in which the public firm consists of multiple subsidiaries, instead of privatizing the public firm as its entirety, the government may privatize only one of the subsidiaries (for example the manufacturing subsidiary). We find that this kind of privatization always improves social welfare comparing to no privatization at all. And comparing to privatizing the public firm in its entirety, privatizing only the manufacturing subsidiary always results in larger consumer welfare and results in larger social welfare when transport cost or R&D cost is sufficiently large.

Keywords: privatization; multi-subsidiary; mixed oligopoly (search for similar items in EconPapers)
JEL-codes: L13 L32 L33 (search for similar items in EconPapers)
Date: 2019
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DOI: 10.1515/bejte-2017-0056

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