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Privatization and Restructuring in Concentrated Markets

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  • Pehr-Johan Norback

    (Research Institute of Industrial Economics)

  • Lars Persson

    (Research Institute of Industrial Economics and CEPR)

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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Bibliographic Info

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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Keywords: Privatization; Asset ownership; Restructuring;

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  1. Schmidt, Klaus M. & Schnitzer, Monika, . "Methods of privatization: Auctions, bargaining, and giveaways," Chapters in Economics, University of Munich, Department of Economics, University of Munich, Department of Economics.
  2. S. Baranzoni & P. Bianchi & L. Lambertini, 2000. "Market Structure," Working Papers 368, Dipartimento Scienze Economiche, Universita' di Bologna.
  3. Bennett, John & Maw, James, 2000. "Privatisation and market structure in a transition economy," Journal of Public Economics, Elsevier, Elsevier, vol. 77(3), pages 357-382, September.
  4. Klemperer, P., 1992. "Competition when Consumers Have Switching Costs: An Overview," Economics Series Working Papers 99142, University of Oxford, Department of Economics.
  5. 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.
  6. Roland, Gerard, 1994. "On the Speed and Sequencing of Privatisation and Restructuring," Economic Journal, Royal Economic Society, Royal Economic Society, vol. 104(426), pages 1158-68, September.
  7. Klemperer, Paul, 1995. "Competition When Consumers Have Switching Costs: An Overview with Applications to Industrial Organization, Macroeconomics, and International Trade," Review of Economic Studies, Wiley Blackwell, Wiley Blackwell, vol. 62(4), pages 515-39, October.
  8. d'ASPREMONT, Claude & JACQUEMIN, Alexis, . "Cooperative and noncooperative R&D in duopoly with spillovers," CORE Discussion Papers RP -823, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
  9. D Leahy & J.P. Neary, 1995. "Public Policy Towards R&D in Oligopolistic Industries," CEP Discussion Papers dp0270, Centre for Economic Performance, LSE.
  10. Florencio Lopez-de-Silane, 1996. "Determinants of Privatization Prices," NBER Working Papers 5494, National Bureau of Economic Research, Inc.
  11. Roland, Gerard & Sekkat, Khalid, 2000. "Managerial career concerns, privatization and restructuring in transition economies," European Economic Review, Elsevier, Elsevier, vol. 44(10), pages 1857-1872, December.
  12. Simeon Djankov & Peter Murrell, 2002. "Enterprise Restructuring in Transition: A Quantitative Survey," Journal of Economic Literature, American Economic Association, vol. 40(3), pages 739-792, September.
  13. J Peter Neary, 2001. "Foreign Competition and Wage Inequality," Working Papers, School Of Economics, University College Dublin 200102, School Of Economics, University College Dublin.
  14. 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.
  15. John Vickers & George Yarrow, 1991. "Economic Perspectives on Privatization," Journal of Economic Perspectives, American Economic Association, vol. 5(2), pages 111-132, Spring.
  16. 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.
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