Privatizing by merger: The case of an inefficient public leader
AbstractWe compare a merger between an inefficient public leader and an efficient follower with unilateral privatization of the public leader (both eliminate the inefficiency of the leader). We identify the circumstances in which the merger increases both welfare and private profit and, for the first time, show that partial privatization by merger often dominates the unilateral privatization despite the loss of a competitor. Recognizing this helps define the extent of partial privatization by merger that should actually be observed and also suggests that more policy emphasis should be placed on privatization by merger.
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Bibliographic InfoArticle provided by Elsevier in its journal International Review of Economics & Finance.
Volume (Year): 27 (2013)
Issue (Month): C ()
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Web page: http://www.elsevier.com/locate/inca/620165
Privatization; Stackelberg leader; Merger paradox; Public firm;
Find related papers by JEL classification:
- L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets
- L40 - Industrial Organization - - Antitrust Issues and Policies - - - General
- L41 - Industrial Organization - - Antitrust Issues and Policies - - - Monopolization; Horizontal Anticompetitive Practices
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