Working Paper No. 532

Privatization as a part of Liberalization Program in an International Oligopoly

Published: March 3, 2000Pages: 47Keywords: Privatization; FDI; Acquisitions; National Treatment; Investment GuaranteesJEL-codes: F23; L13; L33

Privatization as a part of Liberalization Program in an International Oligopoly Pehr-Johan Norbäck and Lars Persson


This paper determines the equilibrium market structure in an international oligopoly which is opened up by a privatization. Market power is shown to be an important determinant of the equilibrium market structure, when greenfield investment costs are high. When the greenfield investment costs are low, however, the risk of monopolization decreases. It is also shown that "Investment Guarantees" can be counterproductive by helping the buyer of the state assets prevent other investors from entering greenfield by credible over-investment. We also find that the negative effects on domestic firms by National Treatments clauses are partly paid for by the foreign investor in the bidding competition over the state assets.

Pehr-Johan Norbäck

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Ph: +46 8 665 4522
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Lars Persson

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Ph: +46 8 665 4504
lars.persson@ifn.se

Interdisciplinary European Studies

The European Union in a Changing World Order

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This book explores how the European Union responds to the ongoing challenges to the liberal international order. These challenges arise both within the EU itself and beyond its borders, and put into question the values of free trade and liberal democracy. 

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