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Partial privatization with endogenous choice of strategic variable

Author

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  • José Méndez‐Naya
  • José A. Novo‐Peteiro

Abstract

This paper analyzes the optimal privatization policy when firms endogenously choose their strategic variable. The level of privatization is shown to determine: (i) the choice of strategic variable, whereby an asymmetric equilibrium could emerge (either Cournot–Bertrand or Bertrand–Cournot); (ii) the stability of equilibrium when the partially privatized firm and the private firm choose quantity and price respectively as the strategic variable; and (iii) the level of welfare, whereby Cournot–Cournot and Bertrand–Cournot games could lead to a greater welfare than the Bertrand–Bertrand model.

Suggested Citation

  • José Méndez‐Naya & José A. Novo‐Peteiro, 2023. "Partial privatization with endogenous choice of strategic variable," Managerial and Decision Economics, John Wiley & Sons, Ltd., vol. 44(2), pages 1215-1227, March.
    • Handle: RePEc:wly:mgtdec:v:44:y:2023:i:2:p:1215-1227
    DOI: 10.1002/mde.3743
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    References listed on IDEAS

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