Firm Ownership, Product Differentiation and Welfare

The purpose of this paper is to study the impact of firm ownership in a differentiated industry. We find there is no effect on product differentiation and welfare due to ownership ratio change between private and state so long as the private (state) ownership in a partially state-owned firm remains at least half (less than half). However, when the private (state) ownership in the partially state-owned firm falls below half (rises more than half), the degree of product differentiation increases (decreases) whereas welfare decreases (increases) in the share of private (state) ownership; and thus the extent of private or state ownership matters.