This paper examines the effect of the change of state shares in a State-owned enterprise (SOE) on the efficiency of the whole society and the payoff of the government.This issue is addressed by setting up a mixed oligopolistic competition model and dividing the analysis into two cases:closed economy and open economy.The basic results are as follows:If the relative production efficiency of an SOE is too low,complete state ownership is not optimal,and privatization will be a necessary step;however,if the relative production efficiency of an SOE is not too low,complete privatization is not optimal both for the government and from the perspective of social welfare.The results can,to a certain extent,provide theoretical support to the government's idea on the SOE reform.