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Privatization and Restructuring in Concentrated Markets

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Author Info
Pehr-Johan Norback (Research Institute of Industrial Economics)
Lars Persson (Research Institute of Industrial Economics and CEPR)

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Abstract

This paper examines the restructuring of state assets in markets deregulated by privatizations and investment liberalizations. We show that the government has a stronger incentive to restructure than the buyer: A firm restructuring only takes into account how much its own profit will increase. The government internalizes that restructuring increases the sales price not only from the increase in the acquirer’s profit, but also from 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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Paper provided by Fondazione Eni Enrico Mattei in its series Working Papers with number 2004.107.

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Date of creation: Jul 2004
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Handle: RePEc:fem:femwpa:2004.107

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Related research
Keywords: Privatization; Asset ownership; Restructuring;

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Find related papers by JEL classification:
D44 - Microeconomics - - Market Structure and Pricing - - - Auctions
L1 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance
L33 - Industrial Organization - - Nonprofit Organizations and Public Enterprise - - - Boundaries of Public and Private Enterprise; Privatization; Contracting Out
L4 - Industrial Organization - - Antitrust Issues and Policies
P31 - Economic Systems - - Socialist Institutions and Their Transitions - - - Socialist Enterprises and Their Transitions

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References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
  1. d'Aspremont, Claude & Jacquemin, Alexis, 1988. "Cooperative and Noncooperative R&D in Duopoly with Spillovers," American Economic Review, American Economic Association, vol. 78(5), pages 1133-37, December. [Downloadable!] (restricted)
  2. Klemperer, Paul, 1995. "Competition When Consumers Have Switching Costs: An Overview with Applications to Industrial Organization, Macroeconomics, and International Trade," Review of Economic Studies, Blackwell Publishing, vol. 62(4), pages 515-39, October. [Downloadable!] (restricted)
  3. Simeon Djankov & Gerhard Pohl, 1997. "Restructuring of Large Firms in Slovakia," William Davidson Institute Working Papers Series 73, William Davidson Institute at the University of Michigan Stephen M. Ross Business School. [Downloadable!]
  4. Florencio Lopez-de-Silane, 1996. "Determinants of Privatization Prices," NBER Working Papers 5494, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
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  5. Roland, Gerard & Sekkat, Khalid, 2000. "Managerial career concerns, privatization and restructuring in transition economies," European Economic Review, Elsevier, vol. 44(10), pages 1857-1872, December. [Downloadable!] (restricted)
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  6. Schmidt, Klaus M. & Schnitzer, Monika, 1997. "Methods of Privatization: Auctions, Bargaining and Give-Aways," CEPR Discussion Papers 1541, C.E.P.R. Discussion Papers. [Downloadable!] (restricted)
  7. Djankov, Simeon & Murrell, Peter, 2002. "Enterprise Restructuring in Transition: A Quantitative Survey," CEPR Discussion Papers 3319, C.E.P.R. Discussion Papers. [Downloadable!] (restricted)
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  8. John Bennett & James Maw, 1998. "Privatisation and Market Structure in a Transition Economy," William Davidson Institute Working Papers Series 175, William Davidson Institute at the University of Michigan Stephen M. Ross Business School. [Downloadable!]
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  9. Roland, Gerard, 1994. "On the Speed and Sequencing of Privatisation and Restructuring," Economic Journal, Royal Economic Society, vol. 104(426), pages 1158-68, September. [Downloadable!] (restricted)
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  10. Neary, J Peter, 2002. "Foreign Competition and Wage Inequality," Review of International Economics, Blackwell Publishing, vol. 10(4), pages 680-93, November. [Downloadable!] (restricted)
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  11. Klemperer, Paul, 1992. "Competition When Consumers Have Switching Costs: An Overview," CEPR Discussion Papers 704, C.E.P.R. Discussion Papers. [Downloadable!] (restricted)
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  12. Vickers, John & Yarrow, George, 1991. "Economic Perspectives on Privatization," Journal of Economic Perspectives, American Economic Association, vol. 5(2), pages 111-32, Spring. [Downloadable!] (restricted)
  13. Joseph Farrell & Carl Shapiro, 1990. "Asset Ownership and Market Structure in Oligopoly," RAND Journal of Economics, The RAND Corporation, vol. 21(2), pages 275-292, Summer. [Downloadable!] (restricted)
  14. William L. Megginson & Jeffry M. Netter, 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. [Downloadable!] (restricted)
  15. Leahy, Dermot & Neary, J Peter, 1997. "Public Policy towards R&D in Oligopolistic Industries," American Economic Review, American Economic Association, vol. 87(4), pages 642-62, September. [Downloadable!] (restricted)
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