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Mathematical Model of Unitary Enterprise Privatization in the Real Sector

Author

Listed:
  • Arkin, V.

    (Central Economics and Mathematics Institute, Russian Academy of Sciences, Moscow, Russia)

  • Slastnikov, A.

    (Central Economics and Mathematics Institute, Russian Academy of Sciences, Moscow, Russia)

Abstract

The paper describes a model, which allows setting and solving the optimization problem for the privatization process of a unitary enterprise. The model assumes the possibility to choose the moment of privatization, as well as the stochastic behavior of the enterprise's profits and its jump-change after privatization. The proposed scheme allows finding the optimal (in NPV criterion of the buyer) moment of privatization and the optimal (in budgetary effect criterion) privatization price. In the case when the profit before and after privatization is modeled by random processes of geometric Brownian motion, the explicit formulas are obtained for the optimal time of privatization and the optimal privatization price. We derive the conditions, under which the optimal scheme allows privatization, and study the dependencies of the optimal privatization time as well as the optimal privatization price on the tax burden and profit parameters (average growth rate and volatility) of the enterprise before and after privatization. It is shown that the dependence of both the optimal time of privatization and the optimal privatization price on the tax burden is essentially determined by a certain indicator characterizing the ratio between the expected profits of an enterprise before and after privatization (being invariant to the tax system).

Suggested Citation

  • Arkin, V. & Slastnikov, A., 2019. "Mathematical Model of Unitary Enterprise Privatization in the Real Sector," Journal of the New Economic Association, New Economic Association, vol. 43(3), pages 12-33.
    • Handle: RePEc:nea:journl:y:2019:i:43:p:12-33
    DOI: 10.31737/2221-2264-2019-43-3-1
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    References listed on IDEAS

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    More about this item

    Keywords

    privatization; unitary enterprises; budgetary effect; uncertainty; time of privatization; privatization price;
    All these keywords.

    JEL classification:

    • C61 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Optimization Techniques; Programming Models; Dynamic Analysis
    • D81 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Criteria for Decision-Making under Risk and Uncertainty
    • G38 - Financial Economics - - Corporate Finance and Governance - - - Government Policy and Regulation

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