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Optimal Privatization Policy with Asymmetry among Private Firms

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  • Haraguchi, Junichi
  • Matsumura, Toshihiro

Abstract

We revisit the relationship between the optimal privatization policy and market competition indexes such as the Hirschman--Herfindahl index, which is affected by the number of firms and asymmetry of size among these firms: the larger the number of firms (the less asymmetry among firms), the lower the market concentration index. The literature on mixed oligopolies suggests that the optimal degree of privatization is increasing with the number of private firms (and, thus, decreasing with the market competition index), assuming that all private firms are homogeneous. We investigate how the asymmetry among private firms affects the optimal degree of privatization. We propose the simplest and natural model formulation for discussing asymmetry among private firms. We find that the optimal degree of privatization is either nonmonotone or monopolistically increasing (and, thus, never monopolistically decreasing) in the asymmetry among private firms.

Suggested Citation

  • Haraguchi, Junichi & Matsumura, Toshihiro, 2017. "Optimal Privatization Policy with Asymmetry among Private Firms," MPRA Paper 77523, University Library of Munich, Germany.
    • Handle: RePEc:pra:mprapa:77523
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    1. Susumu Cato & Toshihiro Matsumura, 2012. "Long-Run Effects of Foreign Penetration on Privatization Policies," Journal of Institutional and Theoretical Economics (JITE), Mohr Siebeck, Tübingen, vol. 168(3), pages 444-454, September.
    2. Toshihiro Matsumura & Makoto Okamura, 2015. "Competition and privatization policies revisited: the payoff interdependence approach," Journal of Economics, Springer, vol. 116(2), pages 137-150, October.
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    Cited by:

    1. Haraguchi, Junichi & Matsumura, Toshihiro, 2021. "Market Concentration, Privatization Policies, and Heterogeneity among Private Firms in Mixed Oligopolies," MPRA Paper 106975, University Library of Munich, Germany.
    2. Jiaqi Chen & Sang‐Ho Lee & Timur K. Muminov, 2022. "R&D spillovers, output subsidies, and privatization in a mixed duopoly: Flexible versus irreversible R&D investments," Bulletin of Economic Research, Wiley Blackwell, vol. 74(3), pages 879-899, July.
    3. Junichi Haraguchi & Toshihiro Matsumura, 2021. "Profit‐enhancing entries in mixed oligopolies," Southern Economic Journal, John Wiley & Sons, vol. 88(1), pages 33-55, July.
    4. Ding Chen & Leonard F. S. Wang & Ji Sun, 2023. "Does CSR influence privatization wave?," Managerial and Decision Economics, John Wiley & Sons, Ltd., vol. 44(2), pages 1088-1097, March.
    5. Ziad Ghandour & Odd Rune Straume, 2022. "Optimal funding coverage in a mixed oligopoly with quality competition and price regulation," Journal of Economics, Springer, vol. 136(3), pages 201-225, August.
    6. Haraguchi, Junichi & Matsumura, Toshihiro, 2020. "Common Ownership among Private Firms and Privatization Policies," MPRA Paper 102152, University Library of Munich, Germany.

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    More about this item

    Keywords

    market concentration index; asymmetry of private firms; mixed oligopolies;
    All these keywords.

    JEL classification:

    • H44 - Public Economics - - Publicly Provided Goods - - - Publicly Provided Goods: Mixed Markets
    • L33 - Industrial Organization - - Nonprofit Organizations and Public Enterprise - - - Comparison of Public and Private Enterprise and Nonprofit Institutions; Privatization; Contracting Out
    • L44 - Industrial Organization - - Antitrust Issues and Policies - - - Antitrust Policy and Public Enterprise, Nonprofit Institutions, and Professional Organizations

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