Privatization in a mixed oligopoly: Productivity, market concentration, and the optimal degree of privatization

This paper investigates the optimal degree of privatization for a public firm in a homogeneous mixed oligopoly. I show that full privatization is optimal when a public firm has a severe productivity disadvantage or competes with many private firms. The optimal degree of partial privatization is increasing in the degree of productivity disadvantage and the number of private firms. I further show that partial privatization can be optimal for a public firm even when full privatization would completely remove any productivity disadvantages.