Privatisation policy with different oligopolistic competition in the public utilities market

Junlong Chen, Xinran Xie, Jiali Liu and Chuiqing Rong

Economic Research-Ekonomska Istraživanja, 2022, vol. 35, issue 1, 6142-6164

Abstract: This study constructs an oligopoly model in public utilities sector to explore the optimal privatisation policy and the factors affecting equilibrium outcomes and explores the optimal proportion of state-owned shares. We also offer empirical evidence of China’s public utilities from 1985 to 2019 to prove the applicability of model results. The results show that, depending on product differentiation, cost variance, technical level, nationalisation, partial or full privatisation can be optimal. Improving capital efficiency increases social welfare in Model PP, but not in Model PS. Product differentiation improves social welfare at the expense of profits in SS model. In Model PM, technical improvements boost private enterprise profits but induce a decrement in social welfare. A high proportion of state-owned shares fail to improve social welfare in Model SM. In a word, the value range of parameters and competition modes in public utilities sector affect market players’ welfare distribution, which identifies with the empirical analysis of China’s public utilities development.

Date: 2022
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DOI: 10.1080/1331677X.2022.2048188

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