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Privatization as a part of a Liberalization Program in an International Oligopoly

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Abstract

This paper determines the equilibrium market structure in an international oligopoly which is opened up by a privatization. Market power is shown to be an important determinant of the equilibrium market structure, when greenfield investment costs are high. When the greenfield investment costs are low, however, the risk of monopolization decreases. It is also shown that "Investment Guarantees" can be counterproductive by helping the buyer of the state assets prevent other investors from entering greenfield by credible over-investment. We also find that the negative effects on domestic firms by National Treatments clauses are partly paid for by the foreign investor in the bidding competition over the state assets.

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  • Norbäck, Pehr-Johan & Persson, Lars, 2000. "Privatization as a part of a Liberalization Program in an International Oligopoly," Working Paper Series 532, Research Institute of Industrial Economics.
    • Handle: RePEc:hhs:iuiwop:0532
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    More about this item

    Keywords

    Privatization; FDI; Acquisitions; National Treatment; Investment Guarantees;
    All these keywords.

    JEL classification:

    • F23 - International Economics - - International Factor Movements and International Business - - - Multinational Firms; International Business
    • L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets
    • L33 - Industrial Organization - - Nonprofit Organizations and Public Enterprise - - - Comparison of Public and Private Enterprise and Nonprofit Institutions; Privatization; Contracting Out

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