Journal of Economics

, Volume 123, Issue 1, pp 71–88 | Cite as

An analysis of entry-then-privatization model: welfare and policy implications

  • Sang-Ho Lee
  • Toshihiro Matsumura
  • Susumu SatoEmail author


This study formulates a new model of mixed oligopolies in free entry markets. A state-owned public enterprise is established before the game, private enterprises enter the market, and then the government chooses the degree of privatization of the public enterprise (termed the entry-then-privatization model herein). We find that under general demand and cost functions, the timing of privatization does not affect consumer surplus or the output of each private firm, while it does affect the equilibrium degree of privatization, number of entering firms, and output of the public firm. The equilibrium degree of privatization is too high (low) for both domestic and world welfare if private firms are domestic (foreign).


Timing of privatization Commitment State-owned public enterprises Foreign competition 

JEL classification

H42 L13 



We are indebted to two anonymous referees for their valuable and constructive suggestions. This work was supported by National Research Foundation of Korea Grant (NRF-2014S1A2A2028188), JSPS KAKENHI (15K03347), and the Zengin Foundation. Needless to say, we are responsible for any remaining errors.


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Copyright information

© Springer-Verlag GmbH Austria 2017

Authors and Affiliations

  1. 1.College of Business AdministrationChonnam National UniversityGwangjuSouth Korea
  2. 2.Institute of Social ScienceThe University of TokyoTokyoJapan
  3. 3.Graduate School of EconomicsThe University of TokyoTokyoJapan

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