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Optimal privatization of vertical public utilities

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  • Jean-François Wen
  • Lasheng Yuan

Abstract

We examine restructuring, divestiture, and deregulation of a vertically integrated public utility, (e.g., electricity), from a public finance perspective. How an optimal restructuring plan for the utility depends on the cost of public funds and on the X-efficiency gains from privatization, how the optimal degree of competition in the upstream and downstream segments are connected, and implications of privatization for consumer prices are examined. The higher the cost of public funds, the more likely the post-privatization price will exceed the regulated public utility price. The greater the X-efficiency gains from privatization, the more likely the post-privatization price will fall.

Suggested Citation

  • Jean-François Wen & Lasheng Yuan, 2010. "Optimal privatization of vertical public utilities," Canadian Journal of Economics, Canadian Economics Association, vol. 43(3), pages 816-831, August.
  • Handle: RePEc:cje:issued:v:43:y:2010:i:3:p:816-831
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    Cited by:

    1. Arup Bose & Barnali Gupta, 2013. "Mixed markets in bilateral monopoly," Journal of Economics, Springer, vol. 110(2), pages 141-164, October.
    2. Chang, Winston W. & Ryu, Han Eol, 2016. "Export rivalry, vertically-related markets, and optimal public ownership policy," Economic Modelling, Elsevier, vol. 54(C), pages 392-401.
    3. Chen, Yi-Wen & Yang, Ya-Po & Wang, Leonard F.S. & Wu, Shih-Jye, 2014. "Technology licensing in mixed oligopoly," International Review of Economics & Finance, Elsevier, vol. 31(C), pages 193-204.

    More about this item

    JEL classification:

    • H4 - Public Economics - - Publicly Provided Goods
    • L1 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance
    • L9 - Industrial Organization - - Industry Studies: Transportation and Utilities

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