Affiliation:
1. Johnson College of Business and Economics University of South Carolina Upstate Spartanburg South Carolina USA
2. School of Economic Sciences Washington State University Pullman Washington USA
Abstract
AbstractWe investigate privatization decisions in a mixed oligopoly market, with and without environmental regulation. We consider three agents: the manager of the public firm, the environmental agency, and the regulator choosing privatization levels; allowing them to assign different weights to pollution. When environmental policy is absent, we find that privatization decisions in equilibrium suffer from agency problems, yielding potentially inefficient privatizations. When environmental regulation is present and privatization decisions precede this regulation, privatizations have no impact on equilibrium output; while the opposite holds when environmental policy is chosen first. Our results, then, identify the presence of a second‐mover advantage when asymmetric government agencies act sequentially.
Subject
Economics and Econometrics,Sociology and Political Science,Finance