Privatization and Restructuring in Concentrated Markets
Date
01.01.2004
01.01.2004
Authors
Lars Persson, Pehr-Johan Norbäck
JEL Code
D44,L1,L33,L4,P31
D44,L1,L33,L4,P31
Keywords:
Privatization,Asset ownership,Restructuring
Privatization,Asset ownership,Restructuring
Publisher
Economy and Society
Economy and Society
Editor
Fausto Panunzi
Fausto Panunzi
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.