We develop a model in which two firms from different countries compete on each other domestic market. Each firms is jointly owned by the residents and the government of its country. The extent of the government's stake in the public enterprise is endogenous and it determines the weight given the domestic consumers' surplus inithe firm's payoff function. We show that the choice of each government's stake depends on a trade-off between allocative efficiency on the domestic market and profitability of foreign markets. We also highlight the fact that the government's stake in on country has an impact of firms' behavior in both countries.
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Find related papers by JEL classification: D43 - Microeconomics - - Market Structure and Pricing - - - Oligopoly and Other Forms of Market Imperfection H42 - Public Economics - - Publicly Provided Goods - - - Publicly Provided Private Goods L33 - Industrial Organization - - Nonprofit Organizations and Public Enterprise - - - Boundaries of Public and Private Enterprise; Privatization; Contracting Out L51 - Industrial Organization - - Regulation and Industrial Policy - - - Economics of Regulation
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