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International Trade and Strategic Privatization

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  • Juan Carlos Bárcena‐Ruiz
  • María Begoña Garzón

Abstract

The literature on mixed oligopoly does not consider the strategic interaction between governments when they decide whether to privatize their publicly‐owned firms. In order to analyze this question, we consider two countries and assume that publicly‐owned firms are less efficient than private firms. We obtain that when the marginal cost of the publicly‐owned firms takes an intermediate value, each government wants it to be the government of the other country that privatizes its publicly‐owned firm. In this case, only one government privatizes, and that government obtains lower social welfare and producer surplus than the other.

Suggested Citation

  • Juan Carlos Bárcena‐Ruiz & María Begoña Garzón, 2005. "International Trade and Strategic Privatization," Review of Development Economics, Wiley Blackwell, vol. 9(4), pages 502-513, November.
    • Handle: RePEc:bla:rdevec:v:9:y:2005:i:4:p:502-513
    DOI: 10.1111/j.1467-9361.2005.00290.x
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