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Seoul Journal of Economics - Vol. 19 , No. 2
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Seoul Journal of Economics - Vol. 19, No. 2, pp. 251-273
Abbreviation: SJE
ISSN: 1225-0279 (Print)
Print publication date 31 May 2006
Received 20 Jun 2005 Revised 29 Mar 2006

The Optimal Government Shareholding Strategy and the Cost Structure
Chin-Shu Huang ; Jen-Yao Lee ; Shih-Shen Chen
Professor, Department of Economics, National Chung Cheng University, Chia-Yi, TAIWAN, Tel: +886-5-2720411 (ext. 34102) (ecdah@ccu.edu.tw)
Assistant Professor, Department of Finance, Kao Yuan University, Kaohsiung, TAIWAN (cculee@seed.net.tw)
Assistant Professor, Department of International Business and Trade, Shu-Te University, Kaohsiung, TAIWAN (chenss@mail.stu.edu.tw)

JEL Classfication: D43, L21, L51

Abstract

This paper analyzes government's optimal shareholding strate@ within the framework of the mixed oligopoly. It is found that: (1) When both public and domestic firms have the same cost coefficient, the government's best policy is to adopt the full mixed oligopoly. (2) When the cost coefficient of the public firm is lower than a threshold value, the government should opt for a full mixed-oligopoly policy. However, when the public firm's cost coefficient is higher than the threshold value, the government should privatize the public firnl completely and exit the market. The single mixed oligopoly is just an alternative proposal when it fails to transform all of the private firms into mixed ownership enterprises.

Keywords: Public firm, Mixed oligopoly, Privatization, Mixed ownership enterprise
Acknowledgments

We are grateful to anonymous referees for their helpful comments. All remaining errors are ours.

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