|dc.description.abstract||This dissertation applies a mixed oligopoly model demonstrating the optimal privatization policy on three issues: environmental damage, network externalities, and price competition.
Chapter 2 explores the effect of privatization on firms’ equilibrium output given that environmental pollution will emerge during the production process. The interaction between the privatization policy and the environmental damage is also analyzed. We find that if the production process accompanies pollution, in contrast to the conventional wisdom, privatization may not decrease the output of the partially-privatized firm. Furthermore, whether privatization improves environmental quality is ambiguous. It will make the environment worse off (better off) if the marginal environmental damage of production is large (small). In addition, the optimal degree of privatization is independent of the marginal damage of pollutant if the environmental damage function is linear. The optimal degree of privatization will be larger (smaller) than that without pollution if the environmental damage function is convex (concave).
Chapter 3 investigates the optimal degree of privatization when there are network externalities in consumption. The impact of the degree of compatibility on the optimal degree of privatization is examined, too. Our major findings are as follows. First, an increase in the degree of network externalities increases the public firm’s output, but may not increase the private firm’s output. Second, the optimal privatization may not decrease against the degree of network externalities. By common wisdom, in the presence of network externalities, the government will reduce the degree of privatization to obtain a greater total output. However, we find that when the products are incompatible with each other and marginal cost increases fast, the optimal privatization will increase with network externalities. Therefore, the optimal privatization with network externalities may be higher than that when network externalities do not exist. Third, whether the optimal privatization with compatibility would be higher than that with incompatibility depends on the increasing speed of marginal cost.
Chapter 4 documents the price competition in a mixed oligopoly which consists of one public firm and one private firm. Three interesting results are obtained. First, the public firm’s price is not necessarily lower than the private firm’s; it can even be higher. Second, in the popular view, privatization will increase the public firm’s price. However, we find that privatization does not assure the increase of the public firm’s price. As the public firm’s cost is high enough, privatization will make the public firm lower its price. Third, contrary to the popular view, we find that if the public firm is less efficient, then the need for the firm to be privatized is less.
Chapter 5 concludes the dissertation and provides some extensions for the future research.