Optimal privatization in a mixed duopoly with consistent conjectures

Heywood, John and Ye, Guangliang (2010) Optimal privatization in a mixed duopoly with consistent conjectures. Journal of Economics, 101 (3). pp. 231-246. ISSN 0931-8658

Abstract

We show that partially privatizing a public firm alters underlying conjectures, in turn, changing the optimal degree of privatization. The consistent conjectures equilibrium (CCE) generates substantially greater optimal privatization than does any conjecture shared between the firms including the standard Cournot–Nash equilibrium (CNE). Yet, when the private rival is foreign, the CCE generates substantially less privatization than the CNE. The optimal extent of privatization with a domestic rival exceeds that with a foreign rival in the CCE as well as in the CNE.