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Privatization and Restructuring in Concentrated Markets

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  • Norbäck, Pehr-Johan

    ()
    (The Research Institute of Industrial Economics)

  • Persson, Lars

    ()
    (The Research Institute of Industrial Economics)

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 Research Institute of Industrial Economics in its series Working Paper Series with number 605.

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Length: 34 pages
Date of creation: 11 Nov 2003
Date of revision:
Handle: RePEc:hhs:iuiwop:0605

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Postal: Research Institute of Industrial Economics, Box 55665, SE-102 15 Stockholm, Sweden
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Fax: +46 8 665 4599
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Web page: http://www.ifn.se/
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Keywords: Privatization; Asset Ownership; Restructuring;

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  1. Neary, J Peter, 2002. "Foreign Competition and Wage Inequality," CEPR Discussion Papers 3420, C.E.P.R. Discussion Papers.
  2. 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.
  3. 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, vol. 62(4), pages 515-39, October.
  4. Roland, Gérard & Sekkat, M. Khalid, 1996. "Managerial Career Concerns, Privatization and Restructuring in Transition Economies," CEPR Discussion Papers 1363, C.E.P.R. Discussion Papers.
  5. Florencio Lopez-de-Silane, 1996. "Determinants of Privatization Prices," NBER Working Papers 5494, National Bureau of Economic Research, Inc.
  6. Klemperer, Paul, 1992. "Competition When Consumers Have Switching Costs: An Overview," CEPR Discussion Papers 704, C.E.P.R. Discussion Papers.
  7. 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.
  8. Roland, Gérard, 1994. "On the Speed and Sequencing of Privatization and Restructuring," CEPR Discussion Papers 942, C.E.P.R. Discussion Papers.
  9. S. Baranzoni & P. Bianchi & L. Lambertini, 2000. "Market Structure," Working Papers 368, Dipartimento Scienze Economiche, Universita' di Bologna.
  10. D Leahy & J.P. Neary, 1995. "Public Policy Towards R&D in Oligopolistic Industries," CEP Discussion Papers dp0270, Centre for Economic Performance, LSE.
  11. 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.
  12. 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.
  13. Schmidt, Klaus M. & Schnitzer, Monika, 1997. "Methods of Privatization: Auctions, Bargaining and Give-Aways," CEPR Discussion Papers 1541, C.E.P.R. Discussion Papers.
  14. 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.
  15. John Vickers & George Yarrow, 1991. "Economic Perspectives on Privatization," Journal of Economic Perspectives, American Economic Association, vol. 5(2), pages 111-132, Spring.
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