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Bargaining externalities in a privatization programme

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  • John Bennett
  • James Maw

Abstract

In privatization programmes, the state commonly keeps a minority ownership stake in firms. We provide an explanation based on the externality that privatization of one firm has on the profitability of others. If this externality is negative, as with oligopolistic firms, the government can gain a strategic advantage in bargaining over the sale of one firm if it keeps an ownership share in another. We consider both the simultaneous and the sequential sale of firms. The results apply to the period in which privatization takes place, and are consistent with the delayed sale of minority ownership often observed in practice.

Suggested Citation

  • John Bennett & James Maw, 2019. "Bargaining externalities in a privatization programme," Economics of Transition and Institutional Change, John Wiley & Sons, vol. 27(2), pages 447-455, February.
    • Handle: RePEc:wly:ectrin:v:27:y:2019:i:2:p:447-455
    DOI: 10.1111/ecot.12206
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    References listed on IDEAS

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