Privatizing by merger: The case of an inefficient public leader
We compare a merger between an inefficient public leader and an efficient follower with unilateral privatization of the public leader (both eliminate the inefficiency of the leader). We identify the circumstances in which the merger increases both welfare and private profit and, for the first time, show that partial privatization by merger often dominates the unilateral privatization despite the loss of a competitor. Recognizing this helps define the extent of partial privatization by merger that should actually be observed and also suggests that more policy emphasis should be placed on privatization by merger.
References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Megginson, William L., 2005. "The economics of bank privatization," Journal of Banking & Finance, Elsevier, vol. 29(8-9), pages 1931-1980, August.
- Huck, Steffen & Konrad, Kai A. & Muller, Wieland, 2001. "Big fish eat small fish: on merger in Stackelberg markets," Economics Letters, Elsevier, vol. 73(2), pages 213-217, November.
- Juan Carlos Bárcena-Ruiz & María Begoña Garzón, 2003.
"Mixed Duopoly, Merger and Multiproduct Firms,"
Journal of Economics,
Springer, vol. 80(1), pages 27-42, 08.
- Jean-Jacques Laffont & Jean Tirole, 1993. "A Theory of Incentives in Procurement and Regulation," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262121743, June.
- Farrell, Joseph & Shapiro, Carl, 1990.
"Horizontal Mergers: An Equilibrium Analysis,"
American Economic Review,
American Economic Association, vol. 80(1), pages 107-26, March.
- Joseph Farrell and Carl Shapiro., 1988. "Horizontal Mergers: An Equilibrium Analysis," Economics Working Papers 8880, University of California at Berkeley.
- Farrell, J. & Shapiro, C., 1988. "Horizontal Mergers: An Equilibrium Analysis," Papers 17, Princeton, Woodrow Wilson School - Discussion Paper.
- Farrell, Joseph & Shapiro, Carl, 1988. "Horizontal Mergers: An Equilibrium Analysis," Department of Economics, Working Paper Series qt0tp305nx, Department of Economics, Institute for Business and Economic Research, UC Berkeley.
- Artz, Benjamin & Heywood, John S. & McGinty, Matthew, 2009. "The merger paradox in a mixed oligopoly," Research in Economics, Elsevier, vol. 63(1), pages 1-10, March.
- repec:ebl:ecbull:v:12:y:2007:i:20:p:1-9 is not listed on IDEAS
- John S. Heywood & Matthew Mcginty, 2007. "Convex Costs And The Merger Paradox Revisited," Economic Inquiry, Western Economic Association International, vol. 45(2), pages 342-349, 04.
- Yasuhiko Nakamura & Tomohiro Inoue, 2007. "Mixed Oligopoly and Productivity-Improving Mergers," Economics Bulletin, AccessEcon, vol. 12(20), pages 1-9.
- Nandini Gupta, 2005. "Partial Privatization and Firm Performance," Journal of Finance, American Finance Association, vol. 60(2), pages 987-1015, 04.
- Wang, Leonard F.S. & Chen, Tai-Liang, 2011. "Mixed oligopoly, optimal privatization, and foreign penetration," Economic Modelling, Elsevier, vol. 28(4), pages 1465-1470, July.
- Pal, Debashis, 1998. "Endogenous timing in a mixed oligopoly," Economics Letters, Elsevier, vol. 61(2), pages 181-185, November.
- John S. Heywood & Matthew McGinty, 2008. "Leading and Merging: Convex Costs, Stackelberg, and the Merger Paradox," Southern Economic Journal, Southern Economic Association, vol. 74(3), pages 879-893, January.
- de Fraja, Giovanni & Delbono, Flavio, 1990. " Game Theoretic Models of Mixed Oligopoly," Journal of Economic Surveys, Wiley Blackwell, vol. 4(1), pages 1-17.
- John S. Heywood & Guangliang Ye, 2009. "Partial Privatization In A Mixed Duopoly With An R&D Rivalry," Bulletin of Economic Research, Wiley Blackwell, vol. 61(2), pages 165-178, 04.
- Yoshio Kamijo & Yasuhiko Nakamura, 2009. "Stable market structures from merger activities in mixed oligopoly with asymmetric costs," Journal of Economics, Springer, vol. 98(1), pages 1-24, September.
- Salant, Stephen W & Switzer, Sheldon & Reynolds, Robert J, 1983. "Losses from Horizontal Merger: The Effects of an Exogenous Change in Industry Structure on Cournot-Nash Equilibrium," The Quarterly Journal of Economics, MIT Press, vol. 98(2), pages 185-99, May.
- Juan Alejandro Gelves, 2010. "Horizontal Merger With An Inefficient Leader," Manchester School, University of Manchester, vol. 78(5), pages 379-394, 09.
- Perry, Martin K & Porter, Robert H, 1985. "Oligopoly and the Incentive for Horizontal Merger," American Economic Review, American Economic Association, vol. 75(1), pages 219-27, March.
- Haller, Stefanie A., 2009. "The impact of multinational entry on domestic market structure and investment," International Review of Economics & Finance, Elsevier, vol. 18(1), pages 52-62, January.
- Shleifer, Andrei & Vishny, Robert W, 1994. "Politicians and Firms," The Quarterly Journal of Economics, MIT Press, vol. 109(4), pages 995-1025, November.
- Fjell, Kenneth & Heywood, John S., 2004. "Mixed oligopoly, subsidization and the order of firm's moves: the relevance of privatization," Economics Letters, Elsevier, vol. 83(3), pages 411-416, June.
- Otchere, Isaac & Chan, Janus, 2003. "Intra-industry effects of bank privatization: A clinical analysis of the privatization of the Commonwealth Bank of Australia," Journal of Banking & Finance, Elsevier, vol. 27(5), pages 949-975, May.
- Z. Ayca Altintig & K. Peren Arin & Eberhard Feess & Christoph Schumacher, 2009. "YOU ARE ONE OF US NOW! HOW DO SHARE PRICES OF RIVALS REACT TO PRIVATIZATION? -super-* ," Journal of Industrial Economics, Wiley Blackwell, vol. 57(2), pages 265-293, 06.
- José Méndez-Naya, 2008. "Merger profitability in mixed oligopoly," Journal of Economics, Springer, vol. 94(2), pages 167-176, July.
- Matsumura, Toshihiro, 1998. "Partial privatization in mixed duopoly," Journal of Public Economics, Elsevier, vol. 70(3), pages 473-483, December.
- Bortolotti, Bernardo & Fantini, Marcella & Siniscalco, Domenico, 2004. "Privatisation around the world: evidence from panel data," Journal of Public Economics, Elsevier, vol. 88(1-2), pages 305-332, January.
- Otchere, Isaac, 2007. "Does the response of competitors to privatization announcements reflect competitive or industry-wide information effects? International evidence," Journal of Empirical Finance, Elsevier, vol. 14(4), pages 523-545, September.
When requesting a correction, please mention this item's handle: RePEc:eee:reveco:v:27:y:2013:i:c:p:69-79. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Zhang, Lei)
If references are entirely missing, you can add them using this form.