Privatization and Restructuring in Concentrated Markets

43 Pages Posted: 23 Aug 2004

See all articles by Lars Persson

Lars Persson

Research Institute of Industrial Economics (IFN); Centre for Economic Policy Research (CEPR)

Pehr-Johan Norbäck

Research Institute of Industrial Economics (IFN)

Multiple version iconThere are 2 versions of this paper

Date Written: July 2004

Abstract

This paper examines the restructuring of state assets in markets deregulated by privatizations and investment liberalizations. We show that the government has a stronger incentive to restructure than the buyer: A firm restructuring only takes into account how much its own profit will increase. The government internalizes that restructuring increases the sales price not only from the increase in the acquirer's profit, but also from a reduced profit for the non-acquirer, whose profits decrease due to its rival's restructuring. We also identify situations where a slow sale can significantly reduce the sales price because of strategic investment and product market effects.

Keywords: Privatization, asset ownership, restructuring

JEL Classification: D44, L10, L33, L40, P31

Suggested Citation

Persson, Lars and Norbäck, Pehr-Johan, Privatization and Restructuring in Concentrated Markets (July 2004). Available at SSRN: https://ssrn.com/abstract=552641 or http://dx.doi.org/10.2139/ssrn.552641

Lars Persson (Contact Author)

Research Institute of Industrial Economics (IFN) ( email )

Box 55665
Grevgatan 34, 2nd floor
Stockholm, SE-102 15
Sweden

Centre for Economic Policy Research (CEPR)

London
United Kingdom

Pehr-Johan Norbäck

Research Institute of Industrial Economics (IFN) ( email )

Box 55665
Grevgatan 34, 2nd floor
Stockholm, SE-102 15
Sweden

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