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Privatizing Multi-subsidiary Public Firm in Location Model

Author

Listed:
  • Chen Jingliang

    (Deloitte Enterprise Consulting (Shanghai) Co., Ltd., 21F Bund Center 222 Yanan Road East, Shanghai200000, P.R. China.)

  • Shuai Jie

    (Wenlan School of Business, Zhongnan University of Economics and Law, 182 Nanhu Ave., East Lake High-tech Development Zone, Wuhan430073, P.R.China.)

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.

Suggested Citation

  • Chen Jingliang & Shuai Jie, 2019. "Privatizing Multi-subsidiary Public Firm in Location Model," The B.E. Journal of Theoretical Economics, De Gruyter, vol. 19(1), pages 1-14, January.
    • Handle: RePEc:bpj:bejtec:v:19:y:2019:i:1:p:14:n:13
    DOI: 10.1515/bejte-2017-0056
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    References listed on IDEAS

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    1. Jie Shuai, 2016. "Mixed Duopoly with Subcontracting," Managerial and Decision Economics, John Wiley & Sons, Ltd., vol. 37(1), pages 37-49, January.
    2. Toshihiro Matsumura & Noriaki Matsushima & Ikuo Ishibashi, 2009. "Privatization and entries of foreign enterprises in a differentiated industry," Journal of Economics, Springer, vol. 98(3), pages 203-219, December.
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    6. Kumar, Ashutosh & Saha, Bibhas, 2008. "Spatial competition in a mixed duopoly with one partially nationalized firm," Journal of Comparative Economics, Elsevier, vol. 36(2), pages 326-341, June.
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    More about this item

    Keywords

    privatization; multi-subsidiary; mixed oligopoly;
    All these keywords.

    JEL classification:

    • L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets
    • L32 - Industrial Organization - - Nonprofit Organizations and Public Enterprise - - - Public Enterprises; Public-Private Enterprises
    • L33 - Industrial Organization - - Nonprofit Organizations and Public Enterprise - - - Comparison of Public and Private Enterprise and Nonprofit Institutions; Privatization; Contracting Out

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