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Optimal privatization policy with asymmetry among private firms
Author(s) -
Haraguchi Junichi,
Matsumura Toshihiro
Publication year - 2020
Publication title -
bulletin of economic research
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.227
H-Index - 29
eISSN - 1467-8586
pISSN - 0307-3378
DOI - 10.1111/boer.12213
Subject(s) - oligopoly , asymmetry , competition (biology) , homogeneous , index (typography) , economics , monotonic function , degree (music) , microeconomics , private sector , market concentration , information asymmetry , market structure , cournot competition , mathematics , physics , quantum mechanics , ecology , mathematical analysis , combinatorics , world wide web , computer science , acoustics , biology , economic growth
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.