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Privatization and Restructuring in Concentrated Markets

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.

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Paper provided by Research Institute of Industrial Economics in its series Working Paper Series with number 605.

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Length: 34 pages
Date of creation: 11 Nov 2003
Date of revision:
Handle: RePEc:hhs:iuiwop:0605
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  1. Roland, Gérard, 1994. "On the Speed and Sequencing of Privatization and Restructuring," CEPR Discussion Papers 942, C.E.P.R. Discussion Papers.
  2. Leahy, Dermot & Neary, J Peter, 1995. "Public Policy Towards R&D in Oligopolistic Industries," CEPR Discussion Papers 1243, C.E.P.R. Discussion Papers.
  3. John Vickers & George Yarrow, 1991. "Economic Perspectives on Privatization," Journal of Economic Perspectives, American Economic Association, vol. 5(2), pages 111-132, Spring.
  4. 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.
  5. Gérard Roland & Khalid Sekkat, 2000. "Managerial career concerns, privatization and restructuring in transition economies," ULB Institutional Repository 2013/7340, ULB -- Universite Libre de Bruxelles.
  6. Djankov, Simeon & Murrell, Peter, 2002. "Enterprise Restructuring in Transition: A Quantitative Survey," CEPR Discussion Papers 3319, C.E.P.R. Discussion Papers.
  7. J. Peter Neary, 2001. "Foreign competition and wage inequality," Working Papers 200102, School of Economics, University College Dublin.
  8. Klemperer, Paul, 1992. "Competition When Consumers Have Switching Costs: An Overview," CEPR Discussion Papers 704, C.E.P.R. Discussion Papers.
  9. Schmidt, Klaus M. & Schnitzer, Monika, . "Methods of privatization: Auctions, bargaining, and giveaways," Chapters in Economics, University of Munich, Department of Economics.
  10. 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.
  11. d'Aspremont, Claude & Jacquemin, Alexis, 1988. "Cooperative and Noncooperative R&D in Duopoly with Spillovers," American Economic Review, American Economic Association, vol. 78(5), pages 1133-37, December.
  12. Simeon Djankov & Gerhard Pohl, 1997. "Restructuring of Large Firms in Slovakia," William Davidson Institute Working Papers Series 73, William Davidson Institute at the University of Michigan.
  13. S. Baranzoni & P. Bianchi & L. Lambertini, 2000. "Multiproduct Firms, Product Differentiation, and Market Structure," Working Papers 368, Dipartimento Scienze Economiche, Universita' di Bologna.
  14. Florencio Lopez-de-Silane, 1996. "Determinants of Privatization Prices," NBER Working Papers 5494, National Bureau of Economic Research, Inc.
  15. Paul Klemperer, 1995. "Competition when Consumers have Switching Costs: An Overview with Applications to Industrial Organization, Macroeconomics, and International Trade," Review of Economic Studies, Oxford University Press, vol. 62(4), pages 515-539.
  16. Bennett, John & Maw, James, 2000. "Privatisation and market structure in a transition economy," Journal of Public Economics, Elsevier, vol. 77(3), pages 357-382, September.
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