Optimal Privatization Policy with Asymmetry among Private Firms

Junichi Haraguchi and Toshihiro Matsumura

MPRA Paper from University Library of Munich, Germany

Abstract: We revisit the relationship between the optimal privatization policy and market competition indexes such as the Hirschman--Herfindahl index, which is affected by the number of firms and asymmetry of size among these firms: the larger the number of firms (the less asymmetry among firms), the lower the market concentration index. The literature on mixed oligopolies suggests that the optimal degree of privatization is increasing with the number of private firms (and, thus, decreasing with the market competition index), assuming that all private firms are homogeneous. We investigate how the asymmetry among private firms affects the optimal degree of privatization. We propose the simplest and natural model formulation for discussing asymmetry among private firms. We find that the optimal degree of privatization is either nonmonotone or monopolistically increasing (and, thus, never monopolistically decreasing) in the asymmetry among private firms.

Keywords: market concentration index; asymmetry of private firms; mixed oligopolies (search for similar items in EconPapers)
JEL-codes: H44 L33 L44 (search for similar items in EconPapers)
Date: 2017-03-15
New Economics Papers: this item is included in nep-bec and nep-com
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Journal Article: Optimal privatization policy with asymmetry among private firms (2020)
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Persistent link: https://EconPapers.repec.org/RePEc:pra:mprapa:77523

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