Optimal partial privatization in an endogenous timing game: a mixed oligopoly approach

This study examines endogenous determinations of both the degree of partial privatization and the timing of quantity competition under a homogeneous product duopoly with a public and either a domestic or a foreign private firm. We develop a three-stage game. In the first stage, a domestic government determines its partial privatization level. In the second stage, each firm decides the timing of its quantity setting. In the third stage, each firm sets its output level based on this timing. To select a single equilibrium for the timing game, we use the risk-dominance criterion. The main conclusion is as follows. When the private firm is domestic, partial privatization and private leadership emerge in equilibrium, whereas when the private firm is foreign, full nationalization and public leadership emerge in equilibrium.