Author(s):	Pehr-Johan Norbäck, Lars Persson
Publication Date:	January 2005
Keyword(s):	asset ownership, oligopoly, privatization, restructuring
JEL(s):	D44, L13, L33, L40, P31
Programme Areas:	Industrial Organization
Link to this Page:	cepr.org/active/publications/discussion_papers/dp.php?dpno=4871

This Paper examines the restructuring of state assets in markets deregulated by privatizations and investment liberalizations. We show that a net revenue maximizing government has a stronger incentive to restructure than a profit maximizing acquiring firm: A restructuring firm only takes into account how much its own profit will increase. The government internalizes that restructuring increases the sales price not only due to the increase in the acquirer's profit, but also due to a reduced profit for the non-acquirer, whose profits decrease due to its rival's restructuring. We also identify situations where a slow sale can significantly reduce the sales price because of strategic investment and product market effects.