We examine in a mixed oligopoly setting how foreign competition and
the excess burden of taxation will affect privatization policy in the presence of
strategic tax/subsidy policies. We show that in the presence of excess burden of
taxation with foreign competitors, output subsidy coupled with import tariff and partial
privatization is adopted to improve the social welfare. However, if the excess
burden of taxation is relatively large, the government may switch to use production
tax coupled with tariff policy and partial privatization to improve the social
welfare

• Foreign competition and optimal privatization with excess burden of taxation