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Optimal Partial Privatization with Asymmetric Demand Information

Author

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  • John S. Heywood
  • Xiangting Hu
  • Guangliang Ye

Abstract

We study a mixed duopoly in which only the private firm directly knows product demand and examine a pooling equilibrium in which a welfare-maximizing government may partially privatize the public firm. We show that the optimal extent of privatization differs, often dramatically, from that without asymmetric information. Indeed, we identify circumstances in which the optimal extent of privatization is zero, in sharp contrast with previous work. In addition, the consumer surplus in the pooling equilibrium routinely exceeds that without asymmetric information, and the social welfare exceeds that without asymmetric information when the cost convexity is small.

Suggested Citation

  • John S. Heywood & Xiangting Hu & Guangliang Ye, 2017. "Optimal Partial Privatization with Asymmetric Demand Information," Journal of Institutional and Theoretical Economics (JITE), Mohr Siebeck, Tübingen, vol. 173(2), pages 347-375, June.
    • Handle: RePEc:mhr:jinste:urn:sici:0932-4569(201706)173:2_347:oppwad_2.0.tx_2-3
    DOI: 10.1628/093245616X14700337830936
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    Citations

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    Cited by:

    1. Ohnishi, Kazuhiro, 2020. "Price-setting mixed duopoly, partial privatisation and subsidisation," MPRA Paper 104063, University Library of Munich, Germany.
    2. Chen, Lirong & Gao, Feiyang & Guo, Tongtong & Huang, Xuanhao, 2023. "Mixed ownership reform and the short-term debt for long-term investment of non-state-owned enterprises: Evidence from China," International Review of Financial Analysis, Elsevier, vol. 90(C).
    3. Haraguchi, Junichi & Matsumura, Toshihiro, 2017. "Firms' Costs, Profits, Entries, and Innovation under Optimal Privatization Policy," MPRA Paper 80927, University Library of Munich, Germany.
    4. Duan, Lian, 2017. "Optimal degree of privatization in a mixed oligopoly with multiple public enterprises," MPRA Paper 82896, University Library of Munich, Germany.
    5. Zheng Wang & John S. Heywood & Guangliang Ye, 2020. "Optimal mixed ownership: A contract view," Economics of Transition and Institutional Change, John Wiley & Sons, vol. 28(1), pages 45-68, January.
    6. Ohnishi, Kazuhiro, 2021. "Pollution, partial privatization and the effect of ambient charges," MPRA Paper 106319, University Library of Munich, Germany.
    7. Ohnishi, Kazuhiro, 2024. "Pollution, partial privatization and the effect of ambient charges: price competition," MPRA Paper 120531, University Library of Munich, Germany.
    8. Haraguchi, Junichi & Hirose, Kosuke, 2018. "Endogenous Timing in a Price-Setting Mixed Oligopoly," MPRA Paper 87285, University Library of Munich, Germany.
    9. Ohnishi, Kazuhiro, 2021. "Pollution, partial privatization and the effect of ambient charges," MPRA Paper 109592, University Library of Munich, Germany, revised 04 Sep 2021.

    More about this item

    JEL classification:

    • L1 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance
    • L3 - Industrial Organization - - Nonprofit Organizations and Public Enterprise

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