The purpose of this paper is to investigate the effect of privatization in a mixed duopoly, where a private firm complete in quantities with a welfare-maximizing public firm. We consider two inefficiencies of the public sector : a possible cost inefficiency and an allocative inefficiency due to...

In the theoretical literature, strong arguments have been provided in support of the efficiency defense in antitrust merger policy. One of the most often cited results is due to Williamson (1968) that shows how relatively small reduction in cost could offset the deadweight loss of a large price...

In this paper, we provide an explanation of why privatization may attract foreign investors interested in entering a regional market. Privatization turns the formerly-public firm into a less aggressive competitor since profit-maximizing output is lower than the welfare-maximizing one. The...