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SOE Reform under Oligopolistic Market Structure: The Optimal Choice of State Shares


  • SUN Qunyan

    (Lingnan College, Sun Yat-Sen University, PRC)

  • LI Jie

    () (Lingnan College, Sun Yat-Sen University, PRC)

  • ZHANG Anming

    (Commerce and Business Administration, University of British Columbia, Canada)


This paper examines the effect of the change of state shares in a state-owned enterprise (SOE) on the efficiency of the whole society and the payoff of the government. This issue is addressed by setting up a mixed oligopolistic competition model and dividing the analysis into two cases: closed economy and open economy. The basic results are as follows: If the relative production efficiency of an SOE is too low, complete state ownership is not optimal, and privatization will be a necessary step; however, if the relative production efficiency of an SOE is not too low, complete privatization is not optimal both for the government and from the perspective of social welfare. The results can, to a certain extent, provide theoretical support to the government s idea on the SOE reform.

Suggested Citation

  • SUN Qunyan & LI Jie & ZHANG Anming, 2006. "SOE Reform under Oligopolistic Market Structure: The Optimal Choice of State Shares," Frontiers of Economics in China, Higher Education Press, vol. 1(1), pages 39-47, March.
  • Handle: RePEc:fec:journl:v:1:y:2006:i:1:p:39-47

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    Cited by:

    1. Li, Lixing, 2008. "Employment burden, government ownership and soft budget constraints: Evidence from a Chinese enterprise survey," China Economic Review, Elsevier, vol. 19(2), pages 215-229, June.

    More about this item


    state shares; transition economy; employment burden; mixed oligopoly; WTO entry and foreign competition;

    JEL classification:

    • P2 - Economic Systems - - Socialist Systems and Transition Economies
    • L3 - Industrial Organization - - Nonprofit Organizations and Public Enterprise
    • L1 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance


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