Economic Integration and Strategic Privatization in an International Mixed Oligopoly

Abstract

This paper analyzes a mixed oligopoly model of two countries, each with public and private firms competing in an international market. The two-country model is compared with the conventional mixed oligopoly model with a single country to examine how the extent of privatization differs. By this comparison, we obtain a deeper appreciation of whether market integration encourages or limits privatization. The analysis shows that the extent of privatization in the international mixed market with two countries is smaller than that in the mixed market with a single domestic country. We further compare the extent of privatization in the noncooperative equilibrium with that in the cooperative equilibrium to show that further privatization leads to higher welfare.