This paper determines the equilibrium ownership structure in an emerging market deregulated by privatization and investment liberalization. It is shown that bidding competition in the privatization stage is necessary but not sufficient for reaching an efficient equilibrium market structure. Competition in the ensuing entry stage is also necessary. Otherwise, one firm can induce another to take the role of the weak firm in the subsequent product market competition, by making concessions in the bidding in the privatization auction. It is also shown that Employment Guarantees may "help" the buyer of the privatized firm "abstain" from investing and by that creating a less competitive market structure.
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Paper provided by Research Institute of Industrial Economics in its series Working Paper Series with number
604.
Length: 33 pages Date of creation: 27 Oct 2003 Date of revision: Handle: RePEc:hhs:iuiwop:0604
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Find related papers by JEL classification: D44 - Microeconomics - - Market Structure and Pricing - - - Auctions F23 - International Economics - - International Factor Movements and International Business - - - Multinational Firms; International Business L10 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - General L40 - Industrial Organization - - Antitrust Issues and Policies - - - General
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