This paper studies privatization policy in an international oligopoly. The argument that equal treatment of foreign investors will be detrimental to domestic welfare by shifting profits from domestic to foreign firms is shown to be less relevant in privatization auctions than in greenfield FDI models, since these profit shifts are partly paid for by the foreign firms in the bidding competition. Effects of local equity requirements, trade and investment policies are also studied. It is, for instance, shown that small local equity requirements are likely to be beneficial but large ones are counterproductive, by preventing welfare-enhancing foreign acquisitions.
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Paper provided by Research Institute of Industrial Economics in its series Working Paper Series with number
608.
Length: 30 pages Date of creation: 25 Nov 2003 Date of revision: Handle: RePEc:hhs:iuiwop:0608
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Find related papers by JEL classification: F23 - International Economics - - International Factor Movements and International Business - - - Multinational Firms; International Business L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets L33 - Industrial Organization - - Nonprofit Organizations and Public Enterprise - - - Boundaries of Public and Private Enterprise; Privatization; Contracting Out
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