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- Competition And Privatization

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Author Info
Ramón Faulí-Oller () (Universidad de Alicante)
Antonia Díaz (Universidad Carlos III de Madrid)

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Abstract

In this paper we study the interaction between privatization and competition (liberalization) in the market. privatization is understood as a change in the objective of the owners of the firm. A public firm maximizes social welfare and a private firm maximizes profits. We find that this diference in objectives matters less the greater the level of competition because then the behavior of a welfare maximizing firm converges to the behavior of a profit maximizing firm. This result implies that privatization works better the greater the competition. On the other hand, the revenues obtained from privatization are decreasing with the level of competition. This implies that privatization aimed to raise revenues impose a cost in terms of allocative eficiency.

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Publisher Info
Paper provided by Instituto Valenciano de Investigaciones Económicas, S.A. (Ivie) in its series Working Papers. Serie AD with number 1999-13.

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Length: 21 pages
Date of creation: May 1999
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Publication status: Published by Ivie
Handle: RePEc:ivi:wpasad:1999-13

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Related research
Keywords: Privatization liberalization

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References listed on IDEAS
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  1. Nirvikar Singh & Xavier Vives, 1984. "Price and Quantity Competition in a Differentiated Duopoly," RAND Journal of Economics, The RAND Corporation, vol. 15(4), pages 546-554, Winter. [Downloadable!] (restricted)
  2. Waverman, Leonard & Sirel, Esen, 1997. "European Telecommunications Markets on the Verge of Full Liberalization," Journal of Economic Perspectives, American Economic Association, vol. 11(4), pages 113-26, Fall. [Downloadable!] (restricted)
  3. Juan Carlos Barcena-Ruiz & Maria Paz Espinosa, 1996. "Long-Term or Short-Term Managerial Incentive Contracts," Journal of Economics & Management Strategy, Blackwell Publishing, vol. 5(3), pages 343-359, 09. [Downloadable!] (restricted)
  4. Barros, Fatima, 1995. "Incentive schemes as strategic variables: An application to a mixed duopoly," International Journal of Industrial Organization, Elsevier, vol. 13(3), pages 373-386, September. [Downloadable!] (restricted)
  5. Newbery, David M & Pollitt, Michael G, 1997. "The Restructuring and Privatization of Britain's CEGB--Was It Worth It?," Journal of Industrial Economics, Blackwell Publishing, vol. 45(3), pages 269-303, September. [Downloadable!] (restricted)
  6. Michael L. Katz, 1991. "Game-Playing Agents: Unobservable Contracts as Precommitments," RAND Journal of Economics, The RAND Corporation, vol. 22(3), pages 307-328, Autumn. [Downloadable!] (restricted)
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  7. Steve Dowrick, 1986. "von Stackelberg and Cournot Duopoly: Choosing Roles," RAND Journal of Economics, The RAND Corporation, vol. 17(2), pages 251-260, Summer. [Downloadable!] (restricted)
  8. de Palma, André & Thisse, Jacques-François, 1995. "Privatization and Efficiency in a Differentiated Industry," CEPR Discussion Papers 1136, C.E.P.R. Discussion Papers. [Downloadable!] (restricted)
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  9. Fershtman, Chaim, 1990. "The Interdependence between Ownership Status and Market Structure: The Case of Privatization," Economica, London School of Economics and Political Science, vol. 57(227), pages 319-28, August. [Downloadable!] (restricted)
  10. Matsumura, Toshihiro, 1998. "Partial privatization in mixed duopoly," Journal of Public Economics, Elsevier, vol. 70(3), pages 473-483, December. [Downloadable!] (restricted)
  11. Fershtman, Chaim & Judd, Kenneth L, 1987. "Equilibrium Incentives in Oligopoly," American Economic Review, American Economic Association, vol. 77(5), pages 927-40, December. [Downloadable!] (restricted)
  12. de Fraja, Giovanni & Delbono, Flavio, 1989. "Alternative Strategies of a Public Enterprise in Oligopoly," Oxford Economic Papers, Oxford University Press, vol. 41(2), pages 302-11, April. [Downloadable!] (restricted)
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