Optimal privatization policy with asymmetry among private firms |
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Authors: | Junichi Haraguchi Toshihiro Matsumura |
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Institution: | Kanagawa University, Kanagawa, Japan and the University of Tokyo, Tokyo, Japan |
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Abstract: | We revisit the relationship between the optimal privatization policy and market competition indexes such as the Hirschman–Herfindahl index. It is affected by the number of the firms and asymmetry among the sizes of the firms; the smaller the number of firms and the more asymmetry among firms, the higher the market concentration index. The literature on mixed oligopolies suggested that the optimal degree of privatization increases with the number of private firms, and thus, decreases with the market competition index, assuming that all private firms are homogeneous. We investigate how asymmetry among private firms affects the optimal degree of privatization. We propose the simplest and natural model formulation to discuss asymmetry among private firms. We find that the optimal degree of privatization is either nonmonotone or monotonically increasing, and thus never monotonically decreasing, in asymmetry among private firms. |
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Keywords: | market concentration index asymmetry of private firms mixed oligopolies H44 L33 L44 |
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