Vertically Related Markets, Foreign Competition and Optimal Privatization Policy. Issue 2 (17th February 2015)

• Record Type: Journal Article
• Authors: Chang, Winston W.; Ryu, Han Eol
• Is Part Of: Review of international economics. Volume 23:Issue 2(2015:May)
• Page Start: 303
• Page End: 319
• Publication Date: 2015-02-17
• Subjects: International economic relations -- Periodicals; International finance -- Periodicals; Economic policy -- Periodicals; 330
• DOI: 10.1111/roie.12172
• Languages: English
• ISSNs: 0965-7576

Abstract

<abstract abstract-type="main"> <title>Abstract</title> <p>This paper examines the optimal privatization policy in vertically related markets in which an upstream public firm competes with a foreign private rival in supplying a produced input to the domestic and foreign downstream firms competing in the domestic market. It shows that if the upstream public firm's market share is sufficiently high, full nationalization is optimal and the resulting profit margin is positive. However, complete privatization is never optimal. Numerical simulations reveal both the diverse optimal privatization regimes and the patterns of optimal privatization levels with varying numbers of the domestic and foreign downstream firms.</p> </abstract>