overlapping ownership, optimal degree of privatization, mixed oligopolies, relative profit maximization, and payoff interdependence
This study investigates the relationship between the optimal privatization policy and the degree of common ownership among private firms by formulating a mixed oligopoly model in which one public firm competes against private firms under common ownership. We find that depending on the private firms' cost structure, one of the following three patterns emerges: (a) the optimal degree of privatization is increasing in the degree of common ownership, (b) the optimal degree of privatization is decreasing in the degree of common ownership, (c) an inverted U-shaped relationship exists between the two. If the marginal cost of private firms is constant, then (b) always emerges, regardless of whether the marginal cost of the public firm is increasing or constant. However, if the marginal cost of private firms is increasing, then all three patterns can emerge. Our results suggest that the property of the optimal privatization policy depends crucially on the cost structure of private firms.
optimal degree of privatization, profit-enhancing entry, and multiple long-run stable equilibria
Mixed oligopolies are characterized by private and public enterprises. Entry into these markets was restrictive, but has now been relaxed by deregulations; as a result, private firms have entered mixed oligopolies. An increase in the number of private firms increases competition among private firms and reduces the profit of incumbent private firms, given the privatization policy remains unchanged. However, an increase in the number of private firms may in turn affect privatization policy, and thus, indirectly affect private firms' profits. Therefore, the overall effect on private firms' profit is ambiguous. In this study, we thus investigate how the number of private firms affects the profit of each private firm in mixed oligopolies. For this end, we use a linear-quadratic production cost function, which covers two popular model formulations in the mixed oligopoly literature. We show that, if the degree of privatization is exogenous, the profit of each private firm is decreasing in the number of private firms. However, if the degree of privatization is endogenous, the relationship between the number of private firms and profit takes an inverted-U shape under a plausible range of cost parameters. Our results imply that there can exist multiple equilibria in free-entry markets with different degrees of privatization.
This study investigates the equilibrium and welfare properties of free entry under common ownership. We formulate a model in which incumbents under common ownership choose whether to enter a new market. We find that an increase in common ownership reduces entries, which may or may not improve welfare. Welfare has an inverted-U shaped relationship with the degree of common ownership. However, if firms do not have common ownership before the entry, after entry common ownership harms welfare.
public financial institutions, differentiated products, Bertrand, Stackelberg, and payoff dominance
We investigate endogenous timing in a mixed duopoly with price competition and with social marginal cost differing from private marginal costs. We find that any equilibrium timing patterns--Bertrand, Stackelberg with private leadership, Stackelberg with public leadership, and multiple Stackelberg equilibria-- emerge. When the foreign ownership share in a private firm is less than 50%, public leadership more likely emerges than private leadership. Conversely, private leadership can emerge in a unique equilibrium when the foreign ownership share in a private firm is large. These results may explain recent policy changes in public financial institutions in Japan. We also find a nonmonotone relationship between the welfare advantage of public and private leadership and the difference between social and private marginal costs for a private firm. A nonmonotone relationship does not emerge in profit ranking.
entry-then-privatization, constant marginal costs, profit-enhancing entry, and two polar equilibrium privatization policies
We investigate a free-entry mixed oligopoly with constant marginal costs. A privatization policy is implemented after private firms enter the market. We find that both full privatization and full nationalization are equilibrium policies, and the former is the worst privatization policy for welfare.
profit tax, minimum profit constraint, foreign ownership, and optimal public ownership
This paper investigate how the corporate (profit) tax rate affects the optimal degree of privatization in a mixed duopoly, while introducing a minimum profit constraint for the private firm. Firstly, we show that the profit tax rate directly affects the behavior of the partially privatized firm and affects the behavior of the private firm through strategic interaction. In addition, we investigate the relationship between the optimal privatization policy and corporate tax policy, and find that the optimal degree of privatization increases with the corporate tax rate, regardless of whether the constraint is binding. The optimal degree of privatization decreases (increases) with the foreign ownership share in the private firm if the constraint is ineffective (effective). This result suggests that a minimum profit constraint can be crucial in the optimal privatization policy.
near-zero emission industry, emission cap, emission intensity, and emission equivalence
We revisit command-and-control regulations and compare their efficiencies, in particular, an emission cap regulation that restricts total emissions and an emission intensity regulation that restricts emissions per unit of output under emission equivalence. We find that in both the most stringent target case, when the target emission level is close to zero, and the weakest target case, when the target emission level is close to business as usual, emission intensity yields greater welfare, although the same may not be true in moderate target cases.
Shadow cost of public funds, free entry, state-owned public enterprises, foreign competition, and time inconsistency
We investigate a mixed oligopoly in a free-entry market in the presence of shadow cost of public funding. The government chooses the degree of privatization before the entry of private firms and then adjusts the degree of privatization after the entry. We show that a pre-entry privatization policy may serve as a commitment device if the foreign ownership share of private firms is moderate, and substitutes the ideal privatization policy with complete commitment if the equilibrium pre-entry privatization policy is partial privatization.