International cross-ownership of firms and strategic privatization policy

We consider how the international cross-ownership of firms affects the privatization of a public firm competing with foreign firms. We show that when firms compete á la Cournot in a third market under a linear demand function, the domestic ownership of foreign firms can impede privatization, whereas...

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Bibliographic Details
Published in:Journal of economics (Vienna, Austria) Austria), 2015-09, Vol.116 (1), p.39-62
Main Authors: Cai, Dapeng, Karasawa-Ohtashiro, Yukio
Format: Article
Language:English
Subjects:
Competition
Demand functions
Economic theory
Economic Theory/Quantitative Economics/Mathematical Methods
Economics
Economics and Finance
Foreign enterprises
Game Theory
Investments
Investors
Macroeconomics/Monetary Economics//Financial Economics
Microeconomics
Mixed enterprises
Nationalization
Privatization
Public enterprise
Public Finance
Public ownership
Social and Behav. Sciences
Stock exchanges
Studies
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Summary:We consider how the international cross-ownership of firms affects the privatization of a public firm competing with foreign firms. We show that when firms compete á la Cournot in a third market under a linear demand function, the domestic ownership of foreign firms can impede privatization, whereas the foreign ownership of the domestic firm can promote privatization. Moreover, the domestic ownership of foreign firms can render neither complete privatization nor complete nationalization optimal under moderate conditions. Conversely, when firms compete á la Bertrand, we demonstrate that it is always optimal to pursue complete nationalization.
ISSN:0931-8658
1617-7134
DOI:10.1007/s00712-014-0429-x