Working Paper No. 604

Endogenous Asset Ownership Structures in Deregulated Markets

Published: October 27, 2003Pages: 33Keywords: Privatization; Ownership; FDI; Auctions; Employment GuaranteesJEL-codes: D44; F23; L10; L40

Endogenous Asset Ownership Structures in Deregulated Markets Pehr-Johan Norbäck and Lars Persson


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.

 

Pehr-Johan Norbäck

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Ph: +46 8 665 4522
Mob: +46 73 547 3379
pehr-johan.norback@if...

Lars Persson

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

An Agenda for Europe

Institutional Reform for Innovation and Entrepreneurship

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The authors of this book, Niklas Elert, Magnus Henrekson and Mikael Stenkula, advise the economies of the European Union to become more entrepreneurial in promoting innovation and economic growth. The authors propose a reform strategy with respect to several aspects to achieve this goal.

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