Abstract
This chapter investigates the effect of capital accumulation on partial privatization. We extend the dynamic oligopoly model proposed by Cellini and Lambertini in 1998 to a dynamic mixed oligopoly model. We show that (i) when a steady state is characterized by a demand-driven (i.e., static) equilibrium, partial privatization is adopted and the privatization ratio perfectly corresponds to the static model; (ii) when a public firm produces Ramsey output, the level of social welfare in a steady state does not depend on the privatization ratio; and (iii) when a private firm produces Ramsey output, the government adopts a full nationalization policy. The results of (ii) and (iii) are in contrast with the static result that partial privatization is optimal.
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