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Partial Privatization under Multimarket Price Competition

Taku Masuda and Susumu Sato

MPRA Paper from University Library of Munich, Germany

Abstract: We investigate the effect of multimarket contacts on the privatization policy in mixed duopoly with price competition. There are two markets, one of which is served solely by the state-owned public firm, and the other is served by both public and private firms. Two markets are linked by the production technology of the public firm. In the general model, we first show that privatization is never optimal in the absence of multimarket contacts, i.e., if there is only one monopoly market or one duopoly market. Then, using a linear-quadratic specification, we show that a positive degree of privatization can be optimal in the presence of multimarket contacts. This result has an implication for the privatization policy in universal service sectors.

Keywords: Multimarket contacts; partial privatization; state-owned public enterprise (search for similar items in EconPapers)
JEL-codes: H42 L33 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-com and nep-mic
Date: 2017-10-30
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