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Privatization and Restructuring in Concentrated Markets

Author

Listed:
  • Pehr-Johan Norback

    (Research Institute of Industrial Economics)

  • Lars Persson

    (Research Institute of Industrial Economics and CEPR)

Abstract

This paper examines the restructuring of state assets in markets deregulated by privatizations and investment liberalizations. We show that the government has a stronger incentive to restructure than the buyer: A firm restructuring only takes into account how much its own profit will increase. The government internalizes that restructuring increases the sales price not only from the increase in the acquirer’s profit, but also from 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

  • Pehr-Johan Norback & Lars Persson, 2004. "Privatization and Restructuring in Concentrated Markets," Working Papers 2004.107, Fondazione Eni Enrico Mattei.
    • Handle: RePEc:fem:femwpa:2004.107
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    References listed on IDEAS

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    More about this item

    Keywords

    Privatization; Asset ownership; Restructuring;
    All these keywords.

    JEL classification:

    • D44 - Microeconomics - - Market Structure, Pricing, and Design - - - Auctions
    • L1 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance
    • L33 - Industrial Organization - - Nonprofit Organizations and Public Enterprise - - - Comparison of Public and Private Enterprise and Nonprofit Institutions; Privatization; Contracting Out
    • L4 - Industrial Organization - - Antitrust Issues and Policies
    • P31 - Political Economy and Comparative Economic Systems - - Socialist Institutions and Their Transitions - - - Socialist Enterprises and Their Transitions

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