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An analysis of entry-then-privatization model: welfare and policy implications

Author

Listed:
  • Sang-Ho Lee

    (Chonnam National University)

  • Toshihiro Matsumura

    (The University of Tokyo)

  • Susumu Sato

    (The University of Tokyo)

Abstract

This study formulates a new model of mixed oligopolies in free entry markets. A state-owned public enterprise is established before the game, private enterprises enter the market, and then the government chooses the degree of privatization of the public enterprise (termed the entry-then-privatization model herein). We find that under general demand and cost functions, the timing of privatization does not affect consumer surplus or the output of each private firm, while it does affect the equilibrium degree of privatization, number of entering firms, and output of the public firm. The equilibrium degree of privatization is too high (low) for both domestic and world welfare if private firms are domestic (foreign).

Suggested Citation

  • Sang-Ho Lee & Toshihiro Matsumura & Susumu Sato, 2018. "An analysis of entry-then-privatization model: welfare and policy implications," Journal of Economics, Springer, vol. 123(1), pages 71-88, January.
  • Handle: RePEc:kap:jeczfn:v:123:y:2018:i:1:d:10.1007_s00712-017-0559-z
    DOI: 10.1007/s00712-017-0559-z
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    References listed on IDEAS

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    Full references (including those not matched with items on IDEAS)

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    More about this item

    Keywords

    Timing of privatization; Commitment; State-owned public enterprises; Foreign competition;
    All these keywords.

    JEL classification:

    • H42 - Public Economics - - Publicly Provided Goods - - - Publicly Provided Private Goods
    • L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets

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