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Competitive Pressure from Neighboring Markets and Optimal Privatization Policy

Junichi Haraguchi, Toshihiro Matsumura () and Shohei Yoshida ()

MPRA Paper from University Library of Munich, Germany

Abstract: We formulate a mixed oligopoly model in which one state-owned public enterprise competes with n private firms in the same market and m private firms in the neighboring market. We investigate how n and m affect the optimal degree of privatization. We find a nonmonotone (monotone) relationship between the optimal degree of privatization and the number of private competitors in the neighboring (same) market. The optimal degree of privatization is increasing in the number of private firms in the same market, and the relationship between the optimal degree of privatization and the number of private competitors in the neighboring market is an inverted U-shape. An increase in m more likely increases the optimal degree of privatization when the degree of product differentiation is low. Our results suggest that more competitive pressure from competitors supplying differentiated products can reduce the optimal degree of privatization.

Keywords: market competitiveness; partial privatization; number of private firms (search for similar items in EconPapers)
JEL-codes: H44 L33 L44 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-bec, nep-com, nep-cta and nep-ind
Date: 2017-10-16
References: View references in EconPapers View complete reference list from CitEc
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Journal Article: Competitive pressure from neighboring markets and optimal privatization policy (2018) Downloads
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