Privatization and Restructuring in Concentrated Markets
AbstractThis Paper examines the restructuring of state assets in markets deregulated by privatizations and investment liberalizations. We show that a net revenue maximizing government has a stronger incentive to restructure than a profit maximizing acquiring firm: A restructuring firm only takes into account how much its own profit will increase. The government internalizes that restructuring increases the sales price not only due to the increase in the acquirer's profit, but also due to a reduced profit for the non-acquirer, whose profits decrease due to its rival's restructuring. We also identify situations where a slow sale can significantly reduce the sales price because of strategic investment and product market effects.
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Bibliographic InfoPaper provided by C.E.P.R. Discussion Papers in its series CEPR Discussion Papers with number 4871.
Date of creation: Jan 2005
Date of revision:
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Other versions of this item:
- Norbäck, Pehr-Johan & Persson, Lars, 2003. "Privatization and Restructuring in Concentrated Markets," Working Paper Series 605, Research Institute of Industrial Economics.
- Pehr-Johan Norback & Lars Persson, 2004. "Privatization and Restructuring in Concentrated Markets," Working Papers 2004.107, Fondazione Eni Enrico Mattei.
- D44 - Microeconomics - - Market Structure and Pricing - - - Auctions
- L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets
- L33 - Industrial Organization - - Nonprofit Organizations and Public Enterprise - - - Comparison of Public and Private Enterprise and Nonprofit Institutions; Privatization; Contracting Out
- L40 - Industrial Organization - - Antitrust Issues and Policies - - - General
- P31 - Economic Systems - - Socialist Institutions and Their Transitions - - - Socialist Enterprises and Their Transitions
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