Privatization of a Renewable Resource Sector in the presence of a Foreign Enterprise

Abstract

We analyze the optimal level of privatization of a state - owned enterprise (SOE) in a renewable resource sector. We construct a model where a SOE and a foreign private enterprise compete in quantity in a market of a renewable resource good. In the short - run, a government should privatize the SOE when the foreign private enterprise is present, while it should keep the SOE when the foreign firm is absent. In the long - run, a government should privatize its SOE regardless of the presence or the absence of the foreign private competitor.