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Research Institute of Industrial Economics (IFN) Working Paper Series

No 604:
Endogenous Asset Ownership Structures in Deregulated Markets

Pehr-Johan Norbäck () and Lars Persson ()

Abstract: This paper determines the equilibrium ownership structure in an emerging market deregulated by privatization and investment liberalization. It is shown that bidding competition in the privatization stage is necessary but not sufficient for reaching an efficient equilibrium market structure. Competition in the ensuing entry stage is also necessary. Otherwise, one firm can induce another to take the role of the weak firm in the subsequent product market competition, by making concessions in the bidding in the privatization auction. It is also shown that Employment Guarantees may "help" the buyer of the privatized firm "abstain" from investing and by that creating a less competitive market structure.

Keywords: Privatization; Ownership; FDI; Auctions; Employment Guarantees; (follow links to similar papers)

JEL-Codes: D44; F23; L10; L40; (follow links to similar papers)

33 pages, October 27, 2003

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