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COMPETITIVE PRIVATIZATION AND TARIFF POLICIES IN AN INTERNATIONAL MIXED DUOPOLY

Authors

  • SANG-HO LEE,

    1. Chonnam National University, Korea
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  • LILI XU,

    1. Chonnam National University, Korea
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  • ZHAO CHEN

    1. China Center for Economic Studies, Fudan University, China
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    • We are grateful to three anonymous referees for their careful and constructive comments on an earlier version of this paper. All errors are ours. Lee is grateful for the financial support provided by the Research Foundation of the College of Business Administration, Chonnam National University, Korea (2011) and Chen would like to thank the Shanghai Leading Academic Discipline Project (B101).


  • Manuscript received 10.6.10; final version received 6.2.12.

Abstract

We consider the interaction of two countries regarding strategic choices on privatization policy in an international mixed market under an open economy. We demonstrate that the equilibrium degree of privatization depends not only on the relative efficiency of the state-owned enterprise, but also on trade policy. We show that, if the state-owned enterprise is relatively inefficient, the competitive optimal degree of privatization is lower in open competition than in closed competition. We also show that the international competitive equilibrium involves less privatization and a higher tariff, even though they are jointly suboptimal.

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