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How Much Should You Own? Cross-ownership and Privatization

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  • Rupayan Pal

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Abstract

This paper examines the interdependence of cross-ownership and level of privatization in case of differentiated products mixed duopoly. It shows that it is optimal for the private firm not to own any (own the entire) portion of the privatized share of its rival firm, if the level of privatization is very low (very high). In equilibrium, the government makes sure that cross-ownership is not attracted. However, in most of the situations, the possibility of cross-ownership adversely affects the prospect of privatization. Results of this paper have strong implications to antitrust regulations and divestment policies. [Working paper No. 2010-015].

Suggested Citation

  • Rupayan Pal, 2010. "How Much Should You Own? Cross-ownership and Privatization," Working Papers id:2810, eSocialSciences.
  • Handle: RePEc:ess:wpaper:id:2810 Note: Institutional Papers
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    References listed on IDEAS

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    1. Inés Macho-Stadler & Thierry Verdier, 1991. "Strategic managerial incentives and cross ownership structure: A note," Journal of Economics, Springer, vol. 53(3), pages 285-297, October.
    2. Fershtman, Chaim, 1990. "The Interdependence between Ownership Status and Market Structure: The Case of Privatization," Economica, London School of Economics and Political Science, vol. 57(227), pages 319-328, August.
    3. Khanna, Tarun & Thomas, Catherine, 2009. "Synchronicity and firm interlocks in an emerging market," Journal of Financial Economics, Elsevier, vol. 92(2), pages 182-204, May.
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    5. Kumar, Ashutosh & Saha, Bibhas, 2008. "Spatial competition in a mixed duopoly with one partially nationalized firm," Journal of Comparative Economics, Elsevier, vol. 36(2), pages 326-341, June.
    6. Jeffry M. Netter & William L. Megginson, 2001. "From State to Market: A Survey of Empirical Studies on Privatization," Journal of Economic Literature, American Economic Association, vol. 39(2), pages 321-389, June.
    7. Bibhas Saha, 2009. "Mixed ownership in a mixed duopoly with differentiated products," Journal of Economics, Springer, vol. 98(1), pages 25-43, September.
    8. repec:rje:randje:v:37:y:2006:1:p:81-99 is not listed on IDEAS
    9. David Gilo & Yossi Moshe & Yossi Spiegel, 2006. "Partial cross ownership and tacit collusion," RAND Journal of Economics, RAND Corporation, vol. 37(1), pages 81-99, March.
    10. Nirvikar Singh & Xavier Vives, 1984. "Price and Quantity Competition in a Differentiated Duopoly," RAND Journal of Economics, The RAND Corporation, pages 546-554.
    11. Matsumura, Toshihiro, 1998. "Partial privatization in mixed duopoly," Journal of Public Economics, Elsevier, vol. 70(3), pages 473-483, December.
    12. Dietzenbacher, Erik & Smid, Bert & Volkerink, Bjorn, 2000. "Horizontal integration in the Dutch financial sector," International Journal of Industrial Organization, Elsevier, vol. 18(8), pages 1223-1242, December.
    13. Alley, Wilson A, 1997. "Partial Ownership Arrangements and Collusion in the Automobile Industry," Journal of Industrial Economics, Wiley Blackwell, vol. 45(2), pages 191-205, June.
    14. Maw, James, 2002. "Partial privatization in transition economies," Economic Systems, Elsevier, vol. 26(3), pages 271-282, September.
    15. Kester, W Carl, 1992. "Industrial Groups as Systems of Contractual Governance," Oxford Review of Economic Policy, Oxford University Press, vol. 8(3), pages 24-44, Autumn.
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    Cited by:

    1. Rupayan Pal & Bibhas Saha, 2010. "Does Partial Privatization Improve the Environment?," Working Papers id:3122, eSocialSciences.
    2. Fanti, Luciano & Buccella, Domenico, 2016. "Passive unilateral cross-ownership and strategic trade policy," Economics - The Open-Access, Open-Assessment E-Journal, Kiel Institute for the World Economy (IfW), vol. 10, pages 1-22.
    3. Rupayan Pal & Bibhas Saha, 2010. "Does partial privatization improve the environment?," Microeconomics Working Papers 23021, East Asian Bureau of Economic Research.

    More about this item

    Keywords

    divestment; developing; transition econoies; firm; industry; consumenr; social welfare; competition; shareholder; Cross-ownership; mixed duopoly; partial privatization; product differentiation;

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