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Privatization and Restructuring in Concentrated Markets


  • Norbäck, Pehr-Johan
  • Persson, Lars


This Paper examines the restructuring of state assets in markets deregulated by privatizations and investment liberalizations. We show that a net revenue maximizing government has a stronger incentive to restructure than a profit maximizing acquiring firm: A restructuring firm only takes into account how much its own profit will increase. The government internalizes that restructuring increases the sales price not only due to the increase in the acquirer's profit, but also due to a reduced profit for the non-acquirer, whose profits decrease due to its rival's restructuring. We also identify situations where a slow sale can significantly reduce the sales price because of strategic investment and product market effects.

Suggested Citation

  • Norbäck, Pehr-Johan & Persson, Lars, 2005. "Privatization and Restructuring in Concentrated Markets," CEPR Discussion Papers 4871, C.E.P.R. Discussion Papers.
  • Handle: RePEc:cpr:ceprdp:4871

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    References listed on IDEAS

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    13. Joseph Farrell & Carl Shapiro, 1990. "Asset Ownership and Market Structure in Oligopoly," RAND Journal of Economics, The RAND Corporation, vol. 21(2), pages 275-292, Summer.
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    More about this item


    asset ownership; oligopoly; privatization; restructuring;

    JEL classification:

    • D44 - Microeconomics - - Market Structure, Pricing, and Design - - - Auctions
    • L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets
    • L33 - Industrial Organization - - Nonprofit Organizations and Public Enterprise - - - Comparison of Public and Private Enterprise and Nonprofit Institutions; Privatization; Contracting Out
    • L40 - Industrial Organization - - Antitrust Issues and Policies - - - General
    • P31 - Economic Systems - - Socialist Institutions and Their Transitions - - - Socialist Enterprises and Their Transitions

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