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Privatization and entries of foreign enterprises in a differentiated industry

Author

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  • Toshihiro Matsumura

    (Institute of Social Science, the University of Tokyo)

  • Noriaki Matsushima

    (Graduate School of Business Administration, Kobe University)

  • Ikuo Ishibashi

    (Department of Economics, Aoyama Gakuin University)

Abstract

We investigate whether or not privatization is beneficial from the viewpoint of social welfare in a monopolistic competition model. We discuss the relationship between the welfare effects of privatization and the degree of foreign direct investment in the private sector, which is an important problem in developing countries and in transition economies such as China and Central and Eastern European countries. We find that, in the long run, privatization of a public firm is more likely to improve welfare when the country depends on foreign capital in the private sector, whereas the opposite tendency exists in the short run.

Suggested Citation

  • Toshihiro Matsumura & Noriaki Matsushima & Ikuo Ishibashi, 2007. "Privatization and entries of foreign enterprises in a differentiated industry," Discussion Papers 2007-01, Kobe University, Graduate School of Business Administration.
  • Handle: RePEc:kbb:dpaper:2007-01
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    Cited by:

    1. Juan Carlos Bárcena-Ruiz & Francisco Javier Casado-Izaga, 2014. "Zoning Under Spatial Price Discrimination," Economic Inquiry, Western Economic Association International, vol. 52(2), pages 659-665, April.
    2. Lee, Sang-Ho & Matsumura, Toshihiro & Sato, Susumu, 2017. "A New Approach to Free Entry Markets in Mixed Oligopolies: Welfare Implications," MPRA Paper 76450, University Library of Munich, Germany.
    3. Yang, Ya-Po & Wu, Shih-Jye & Hu, Jin-Li, 2014. "Market Structure, Production Efficiency, And Privatization," Hitotsubashi Journal of Economics, Hitotsubashi University, vol. 55(1), pages 89-108, June.
    4. Juan Carlos Bárcena-Ruiz & F. Javier Casado-Izaga & Hamid Hamoudi & Isabel Rodriguez, 2016. "Optimal zoning in the unconstrained Hotelling game," Papers in Regional Science, Wiley Blackwell, vol. 95(2), pages 427-435, June.
    5. Hiroaki Ino & Toshihiro Matsumura, 2010. "What role should public enterprises play in free-entry markets?," Journal of Economics, Springer, vol. 101(3), pages 213-230, November.
    6. Wang, Leonard F.S. & Chen, Tai-Liang, 2011. "Mixed oligopoly, optimal privatization, and foreign penetration," Economic Modelling, Elsevier, vol. 28(4), pages 1465-1470, July.
    7. repec:kap:jeczfn:v:123:y:2018:i:1:d:10.1007_s00712-017-0559-z is not listed on IDEAS
    8. Bouwe Dijkstra & Anuj Mathew & Arijit Mukherjee, 2015. "Privatization in the presence of foreign competition and strategic policies," Journal of Economics, Springer, vol. 114(3), pages 271-290, April.
    9. repec:eee:reveco:v:49:y:2017:i:c:p:58-68 is not listed on IDEAS
    10. repec:bla:manchs:v:85:y:2017:i:3:p:339-356 is not listed on IDEAS
    11. Bárcena-Ruiz, Juan Carlos, 2012. "Privatization when the public firm is as efficient as private firms," Economic Modelling, Elsevier, vol. 29(4), pages 1019-1023.
    12. Juan Carlos Bárcena-Ruiz & F. Javier Casado-Izaga, 2016. "Foreign-owned firms and zoning under spatial price discrimination," Letters in Spatial and Resource Sciences, Springer, vol. 9(2), pages 145-155, July.
    13. Quan Dong & Juan Carlos Bárcena-Ruiz & María Begoña Garzón, 2015. "Restrictions on Foreign Investments and the Relocation of Firms," Australian Economic Papers, Wiley Blackwell, vol. 54(4), pages 250-265, December.
    14. Cato, Susumu & Matsumura, Toshihiro, 2017. "Optimal Production Tax and Privatization Policies under an Endogenous Market Structure," MPRA Paper 82893, University Library of Munich, Germany.
    15. Haraguchi, Junichi & Matsumura, Toshihiro, 2014. "Price versus quantity in a mixed duopoly with foreign penetration," Research in Economics, Elsevier, vol. 68(4), pages 338-353.
    16. repec:eee:japwor:v:46:y:2018:i:c:p:1-8 is not listed on IDEAS
    17. Dong, Quan & Bárcena-Ruiz, Juan Carlos, 2014. "Corruption and decisions on opening up markets," Economic Modelling, Elsevier, vol. 36(C), pages 23-29.
    18. Arup Bose & Barnali Gupta, 2013. "Mixed markets in bilateral monopoly," Journal of Economics, Springer, vol. 110(2), pages 141-164, October.
    19. repec:bpj:bejtec:v:17:y:2017:i:2:p:9:n:2 is not listed on IDEAS
    20. Toshihiro Matsumura & Akira Ogawa, 2010. "On The Robustness Of Private Leadership In Mixed Duopoly," Australian Economic Papers, Wiley Blackwell, vol. 49(2), pages 149-160, June.
    21. Kazuhiko Kato, 2013. "Optimal degree of privatization and the environmental problem," Journal of Economics, Springer, vol. 110(2), pages 165-180, October.
    22. Haraguchi, Junichi & Matsumura, Toshihiro & Yoshida, Shohei, 2018. "Competitive pressure from neighboring markets and optimal privatization policy," Japan and the World Economy, Elsevier, vol. 46(C), pages 1-8.
    23. Arghya Ghosh & Manipushpak Mitra & Bibhas Saha, 2015. "Privatization, Underpricing, and Welfare in the Presence of Foreign Competition," Journal of Public Economic Theory, Association for Public Economic Theory, vol. 17(3), pages 433-460, June.
    24. Ming Lin & Toshihiro Matsumura, 2012. "Presence of foreign investors in privatized firms and privatization policy," Journal of Economics, Springer, vol. 107(1), pages 71-80, September.
    25. Alessandra Chirco & Marcella Scrimitore, 2017. "Privatization in an International Mixed Oligopoly: the Role of Product Differentiation under Price Competition," EERI Research Paper Series EERI RP 2017/06, Economics and Econometrics Research Institute (EERI), Brussels.

    More about this item

    Keywords

    mixed oligopoly; privatization; product differentiation; foreign firms; free entry;

    JEL classification:

    • H42 - Public Economics - - Publicly Provided Goods - - - Publicly Provided Private Goods
    • L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets
    • C72 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Noncooperative Games

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