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Endogenous asset ownership structures in deregulated markets

  • Norback, Pehr-Johan
  • Persson, Lars

This paper determines the equilibrium ownership structure in an emerging market deregulated by privatization and investment liberalization. It is shown that bidding competition in the privatization stage is necessary but not sufficient for reaching an efficient equilibrium market structure. Competition in the ensuing entry stage is also necessary. Otherwise, one firm can induce another to take the role of the weak firm in the subsequent product market competition, by making concessions in the bidding in the privatization auction. It is also shown that Employment Guarantees may "help" the buyer of the privatized firm "abstain" from investing and by that creating a less competitive market structure.

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Article provided by Elsevier in its journal European Economic Review.

Volume (Year): 50 (2006)
Issue (Month): 7 (October)
Pages: 1729-1752

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Handle: RePEc:eee:eecrev:v:50:y:2006:i:7:p:1729-1752
Contact details of provider: Web page: http://www.elsevier.com/locate/eer

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  1. Hakenes, Hendrik & Schnabel, Isabel, 2000. "License Auctions and Market Structure," Sonderforschungsbereich 504 Publications 01-21, Sonderforschungsbereich 504, Universität Mannheim;Sonderforschungsbereich 504, University of Mannheim.
  2. Klemperer, Paul, 2000. "What Really Matters in Auction Design," CEPR Discussion Papers 2581, C.E.P.R. Discussion Papers.
  3. Krishna, K., 1990. "Auctions with Endogenous Valuations: The Persistence of Monopoly Revisited," Papers 472, Stockholm - International Economic Studies.
  4. Persson, Lars & Norbäck, Pehr-Johan, 2001. "Privatization and Foreign Competition," Working Paper Series 545, Research Institute of Industrial Economics, revised 02 Feb 2001.
  5. Carlin, Wendy & Landesmann, Michael, 1997. "From Theory into Practice? Restructuring and Dynamism in Transition Economies," Oxford Review of Economic Policy, Oxford University Press, vol. 13(2), pages 77-105, Summer.
  6. Schmidt, Klaus M. & Schnitzer, Monika, 1997. "Methods of Privatization: Auctions, Bargaining and Give-Aways," CEPR Discussion Papers 1541, C.E.P.R. Discussion Papers.
  7. Norback, Pehr-Johan & Persson, Lars, 2006. "Endogenous asset ownership structures in deregulated markets," European Economic Review, Elsevier, vol. 50(7), pages 1729-1752, October.
  8. Saul Estrin, 2002. "Competition and Corporate Governance in Transition," Journal of Economic Perspectives, American Economic Association, vol. 16(1), pages 101-124, Winter.
  9. Simeon Djankov & Peter Murrell, 2002. "Enterprise Restructuring in Transition: A Quantitative Survey," Journal of Economic Literature, American Economic Association, vol. 40(3), pages 739-792, September.
  10. Raymond Deneckere & Carl Davidson, 1985. "Incentives to Form Coalitions with Bertrand Competition," RAND Journal of Economics, The RAND Corporation, vol. 16(4), pages 473-486, Winter.
  11. Bernardo Bortolotti & Marcella Fantini & Domenico Siniscalco, 2001. "Privatisation Around the World: New Evidence from Panel Data," CESifo Working Paper Series 600, CESifo Group Munich.
  12. Chen, Yongmin, 2000. "Strategic Bidding by Potential Competitors: Will Monopoly Persist?," Journal of Industrial Economics, Wiley Blackwell, vol. 48(2), pages 161-75, June.
  13. Ghemawat, Pankaj, 1990. "The snowball effect," International Journal of Industrial Organization, Elsevier, vol. 8(3), pages 335-351, September.
  14. John Vickers & George Yarrow, 1991. "Economic Perspectives on Privatization," Journal of Economic Perspectives, American Economic Association, vol. 5(2), pages 111-132, Spring.
  15. Jeffry M. Netter & William L. Megginson, 2001. "From State to Market: A Survey of Empirical Studies on Privatization," Journal of Economic Literature, American Economic Association, vol. 39(2), pages 321-389, June.
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