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Nationalization as Credible Threat Against Collusion

Author

Listed:
  • Flavio Delbono

    (University of Bologna)

  • Luca Lambertini

    (University of Bologna)

Abstract

Within a simple model of differentiated oligopoly, we show that tacit collusion may be prevented by the threat of nationalising a private firm coupled with the appropriate choice of the weight given to private profits in the maximand of the nationalised company. This happens because the threat of nationalization eliminates the prisoners’ dilemma usually associated with a Cournot game among profit-seekers. We characterise the properties of such a threat and prove that it may allow the policy maker to credibly deter collusion.

Suggested Citation

  • Flavio Delbono & Luca Lambertini, 2016. "Nationalization as Credible Threat Against Collusion," Journal of Industry, Competition and Trade, Springer, vol. 16(1), pages 127-136, March.
  • Handle: RePEc:kap:jincot:v:16:y:2016:i:1:d:10.1007_s10842-015-0211-y
    DOI: 10.1007/s10842-015-0211-y
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    Cited by:

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    2. João Correia-da-Silva & Joana Pinho, 2018. "Collusion in mixed oligopolies and the coordinated effects of privatization," Journal of Economics, Springer, vol. 124(1), pages 19-55, May.

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    More about this item

    Keywords

    Tacit collusion; Nationalization; Mixed oligopoly;
    All these keywords.

    JEL classification:

    • L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets
    • L32 - Industrial Organization - - Nonprofit Organizations and Public Enterprise - - - Public Enterprises; Public-Private Enterprises

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