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Welfare Analysis Of Privatization In A Mixed Market With Bargaining

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  • LILY JIANG

Abstract

The author analyzes the welfare effects of privatization in a mixed duopoly model in which the wage rate for the privatized firm is determined by Nash bargaining beforehand. The evaluations are based on three‐stage privatization frameworks respectively under two regimes: Cournot competition and a public firm acting as a Stackelberg leader. The author finds that the optimal degrees of privatization from the viewpoint of social welfare may be different for various types of competition. The article also shows that even optimal privatization set by a welfare‐maximization government may not guarantee welfare improvement, owing to the interference of wage bargaining. (JEL D60, D78, L32, L33)

Suggested Citation

  • Lily Jiang, 2006. "Welfare Analysis Of Privatization In A Mixed Market With Bargaining," Contemporary Economic Policy, Western Economic Association International, vol. 24(3), pages 395-406, July.
    • Handle: RePEc:bla:coecpo:v:24:y:2006:i:3:p:395-406
    DOI: 10.1093/cep/byj029
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    References listed on IDEAS

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    1. Arieh Avishur, 2000. "A Positive Theory of Privatization," Journal of Applied Economics, Universidad del CEMA, vol. 3, pages 1-55, May.
    2. Boycko, Maxim & Shleifer, Andrei & Vishny, Robert W, 1996. "A Theory of Privatisation," Economic Journal, Royal Economic Society, vol. 106(435), pages 309-319, March.
    3. Boardman, Anthony E & Vining, Aidan R, 1989. "Ownership and Performance in Competitive Environments: A Comparison of the Performance of Private, Mixed, and State-Owned Enterprises," Journal of Law and Economics, University of Chicago Press, vol. 32(1), pages 1-33, April.
    4. Arieh Avishur, 2000. "A Positive Theory of Privatization," Journal of Applied Economics, Taylor & Francis Journals, vol. 3(1), pages 1-55, May.
    5. John Vickers & George Yarrow, 1991. "Economic Perspectives on Privatization," Journal of Economic Perspectives, American Economic Association, vol. 5(2), pages 111-132, Spring.
    6. Birdsall, Nancy & Nellis, John, 2003. "Winners and Losers: Assessing the Distributional Impact of Privatization," World Development, Elsevier, vol. 31(10), pages 1617-1633, October.
    7. Matsumura, Toshihiro, 1998. "Partial privatization in mixed duopoly," Journal of Public Economics, Elsevier, vol. 70(3), pages 473-483, December.
    8. Megginson, William L & Nash, Robert C & van Randenborgh, Matthias, 1994. "The Financial and Operating Performance of Newly Privatized Firms: An International Empirical Analysis," Journal of Finance, American Finance Association, vol. 49(2), pages 403-452, June.
    9. John Vickers & George Yarrow, 1988. "Privatization: An Economic Analysis," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262720116, December.
    10. Drook-Gal, Bat-Sheva & Epstein, Gil S. & Nitzan, Shmuel, 2004. "Contestable privatization," Journal of Economic Behavior & Organization, Elsevier, vol. 54(3), pages 377-387, July.
    11. Willner, Johan, 1999. "Policy objectives and performance in a mixed market with bargaining," International Journal of Industrial Organization, Elsevier, vol. 17(1), pages 137-145, January.
    12. Yarrow, George, 1989. "Privatization and economic performance in Britain," Carnegie-Rochester Conference Series on Public Policy, Elsevier, vol. 31(1), pages 303-344, January.
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    Cited by:

    1. De Donder, Philippe & Roemer, John E., 2009. "Mixed oligopoly equilibria when firms' objectives are endogenous," International Journal of Industrial Organization, Elsevier, vol. 27(3), pages 414-423, May.
    2. Hsu, Su-Ying & Lo, Chu-Ping & Wu, Shih-Jye, 2014. "The nexus of market concentration and privatization policy in mixed oligopoly," Economic Modelling, Elsevier, vol. 38(C), pages 196-203.
    3. Nakamura, Tamotsu & Takami, Hiroyuki, 2015. "Nash bargaining and partial privatization in mixed oligopoly," Economic Modelling, Elsevier, vol. 46(C), pages 315-321.
    4. Artz, Benjamin & Heywood, John S. & McGinty, Matthew, 2009. "The merger paradox in a mixed oligopoly," Research in Economics, Elsevier, vol. 63(1), pages 1-10, March.
    5. 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.
    6. Leonard F. S. Wang & Yoshihiro Tomaru & Chan Zhou, 2024. "Free entry in mixed oligopoly leads to insufficient privatization?," International Journal of Economic Theory, The International Society for Economic Theory, vol. 20(1), pages 56-69, March.

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    More about this item

    JEL classification:

    • D60 - Microeconomics - - Welfare Economics - - - General
    • D78 - Microeconomics - - Analysis of Collective Decision-Making - - - Positive Analysis of Policy Formulation and Implementation
    • L32 - Industrial Organization - - Nonprofit Organizations and Public Enterprise - - - Public Enterprises; Public-Private Enterprises
    • L33 - Industrial Organization - - Nonprofit Organizations and Public Enterprise - - - Comparison of Public and Private Enterprise and Nonprofit Institutions; Privatization; Contracting Out

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