How much should you own? Cross-ownership and privatization
AbstractThis paper investigates the effects of cross-ownership on optimal privatization, and vice-versa, in mixed duopoly. It shows that cross-ownership is profitable to the private firm only if the level of privatization of the public firm is sufficiently high. In equilibrium, cross-ownership does not take place even if there is partial privatization. However, the possibility of cross-ownership significantly limits the socially optimal level of privatization in most of the situations. Moreover, it demonstrates that full nationalization is socially optimal, in case of sufficiently convex identical cost functions and homogeneous goods. These results have strong implications to both divestment and competition policies.
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Bibliographic InfoPaper provided by Indira Gandhi Institute of Development Research, Mumbai, India in its series Indira Gandhi Institute of Development Research, Mumbai Working Papers with number 2012-008.
Length: 37 pages
Date of creation: Mar 2012
Date of revision:
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Cross-ownership; mixed duopoly; partial privatization; product differentiation;
Other versions of this item:
- Rupayan Pal, 2010. "How much should you own? Cross-ownership and privatization," Indira Gandhi Institute of Development Research, Mumbai Working Papers 2010-015, Indira Gandhi Institute of Development Research, Mumbai, India.
- D43 - Microeconomics - - Market Structure and Pricing - - - Oligopoly and Other Forms of Market Imperfection
- L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets
- H42 - Public Economics - - Publicly Provided Goods - - - Publicly Provided Private Goods
- L32 - Industrial Organization - - Nonprofit Organizations and Public Enterprise - - - Public Enterprises; Public-Private Enterprises
This paper has been announced in the following NEP Reports:
- NEP-ALL-2012-03-28 (All new papers)
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