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A note on the privatization neutrality result with colluding private firms

Author

Listed:
  • Marc Escrihuela-Villar

    (Universitat de les Illes Balears)

  • Carlos Gutiérrez-Hita

    (Universitas Miguel Hernández and Universidad Nebrija)

Abstract

In a mixed quantity-setting oligopoly, we investigate the welfare effects of privatization in the presence of an optimal output subsidy. We find that the privatization neutrality result is not satisfied whenever there is at least some cooperation between the private firms. Our result suggests that the degree of cooperation between private firms reduces the government incentives to privatize the public firm. In addition, if a consumer surplus bias of the public firm is considered, the privatization neutrality result does not hold either, and the incentives to privatize the public firm are further reduced.

Suggested Citation

  • Marc Escrihuela-Villar & Carlos Gutiérrez-Hita, 2018. "A note on the privatization neutrality result with colluding private firms," Economics Bulletin, AccessEcon, vol. 38(4), pages 2016-2025.
    • Handle: RePEc:ebl:ecbull:eb-18-00568
    as

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    References listed on IDEAS

    as
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    More about this item

    Keywords

    Imperfect competition; Mixed oligopoly; Partial privatization; Subsidies.;
    All these keywords.

    JEL classification:

    • L1 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance
    • L4 - Industrial Organization - - Antitrust Issues and Policies

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