Strategic Policy Choices on Privatization in an International Mixed Duopoly

AbstractWe consider the interaction of two countries regarding strategic choices on privatization policy in an international mixed market under an open economy. We demonstrate that the equilibrium degree of privatization depends not only on the relative efficiency of the state-owned enterprise, but also on trade policy. We show that the international competitive equilibrium involves less privatization and a higher tariff, even though they are jointly suboptimal