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How Much Should You Own? Cross-ownership and Privatization

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  • Rupayan Pal

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    Abstract

    This paper examines the interdependence of cross-ownership and level of privatization in case of differentiated products mixed duopoly. It shows that it is optimal for the private firm not to own any (own the entire) portion of the privatized share of its rival firm, if the level of privatization is very low (very high). In equilibrium, the government makes sure that cross-ownership is not attracted. However, in most of the situations, the possibility of cross-ownership adversely affects the prospect of privatization. Results of this paper have strong implications to antitrust regulations and divestment policies. [Working paper No. 2010-015].

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    Bibliographic Info

    Paper provided by eSocialSciences in its series Working Papers with number id:2810.

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    Date of creation: Sep 2010
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    Handle: RePEc:ess:wpaper:id:2810

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    Related research

    Keywords: divestment; developing; transition econoies; firm; industry; consumenr; social welfare; competition; shareholder; Cross-ownership; mixed duopoly; partial privatization; product differentiation;

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    References

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    1. Macho, I. & Verdier, T., 1989. "Strategic Managerial Incentives and Cross Ownership Structure: A Note," DELTA Working Papers, DELTA (Ecole normale supérieure) 89-02, DELTA (Ecole normale supérieure).
    2. Alley, Wilson A, 1997. "Partial Ownership Arrangements and Collusion in the Automobile Industry," Journal of Industrial Economics, Wiley Blackwell, Wiley Blackwell, vol. 45(2), pages 191-205, June.
    3. Reynolds, Robert J. & Snapp, Bruce R., 1986. "The competitive effects of partial equity interests and joint ventures," International Journal of Industrial Organization, Elsevier, Elsevier, vol. 4(2), pages 141-153, June.
    4. Fershtman, Chaim, 1990. "The Interdependence between Ownership Status and Market Structure: The Case of Privatization," Economica, London School of Economics and Political Science, London School of Economics and Political Science, vol. 57(227), pages 319-28, August.
    5. Matsumura, Toshihiro, 1998. "Partial privatization in mixed duopoly," Journal of Public Economics, Elsevier, Elsevier, vol. 70(3), pages 473-483, December.
    6. Sumon Kumar Bhaumik & Jenifer Piesse, 2006. "Does lending behaviour of banks in emerging economies vary by ownership? Evidence from the Indian banking sector," CEDI Discussion Paper Series, Centre for Economic Development and Institutions(CEDI), Brunel University 06-01, Centre for Economic Development and Institutions(CEDI), Brunel University.
    7. Dietzenbacher, Erik & Smid, Bert & Volkerink, Bjorn, 2000. "Horizontal integration in the Dutch financial sector," International Journal of Industrial Organization, Elsevier, Elsevier, vol. 18(8), pages 1223-1242, December.
    8. Jeffry M. Netter & William L. Megginson, 2001. "From State to Market: A Survey of Empirical Studies on Privatization," Journal of Economic Literature, American Economic Association, vol. 39(2), pages 321-389, June.
    9. Kester, W Carl, 1992. "Industrial Groups as Systems of Contractual Governance," Oxford Review of Economic Policy, Oxford University Press, Oxford University Press, vol. 8(3), pages 24-44, Autumn.
    10. Maw, James, 2002. "Partial privatization in transition economies," Economic Systems, Elsevier, Elsevier, vol. 26(3), pages 271-282, September.
    11. Nirvikar Singh & Xavier Vives, 1984. "Price and Quantity Competition in a Differentiated Duopoly," RAND Journal of Economics, The RAND Corporation, vol. 15(4), pages 546-554, Winter.
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    Cited by:
    1. Luciano Fanti, 2011. "Cross-participated firms and welfare," Discussion Papers 2011/127, Dipartimento di Economia e Management (DEM), University of Pisa, Pisa, Italy.
    2. Luciano Fanti, 2011. "Cross-ownership and unions in a Cournot duopoly: when profits reduce with horizontal product differentiation," Discussion Papers 2011/128, Dipartimento di Economia e Management (DEM), University of Pisa, Pisa, Italy.
    3. Rupayan Pal & Bibhas Saha, 2010. "Does partial privatization improve the environment?," Microeconomics Working Papers 23021, East Asian Bureau of Economic Research.
    4. Luciano Fanti, 2014. "Welfare effects of cross-ownership in a unionised duopoly," ECONOMIA E POLITICA INDUSTRIALE, FrancoAngeli Editore, FrancoAngeli Editore, vol. 2014(2), pages 21-41.
    5. Fanti, Luciano & Gori, Luca, 2011. "Cross-ownership and stability in a Cournot duopoly," MPRA Paper 34574, University Library of Munich, Germany.
    6. Luciano Fanti, 2011. "Product differentiation and duopoly: when social welfare benefits from cross-shareholding," Discussion Papers 2011/129, Dipartimento di Economia e Management (DEM), University of Pisa, Pisa, Italy.
    7. Rupayan Pal & Bibhas Saha, 2010. "Does Partial Privatization Improve the Environment?," Working Papers id:3122, eSocialSciences.

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