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An efficient privatization mechanism

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  • Nejat Anbarcia
  • Mehmet E. Karaaslanb

Abstract

We consider the privatization of State-Owned Enterprises (SOEs) of which markets can be opened to competition once privatization takes place and competitors can compete successfully against them in a few years. The currently used “Revenue Maximization (RM)” scheme maximizes the government revenue from privatization but does not provide incentives for the privatized SOE to charge a price lower than the monopoly price until competition arises. We propose the “Welfare Maximization (WM)” scheme, which induces the privatized SOE to charge a competitive price without resorting to regulation. Also, WM provides greater incentives for post-privatization cost reduction.

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Bibliographic Info

Article provided by Taylor & Francis Journals in its journal Journal of Economic Policy Reform.

Volume (Year): 2 (1998)
Issue (Month): 1 ()
Pages: 73-87

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Handle: RePEc:taf:jpolrf:v:2:y:1998:i:1:p:73-87

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Related research

Keywords: State-owned enterprises (SOEs); Privatization; Revenue Maximization Scheme; Welfare Maximization Scheme;

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  1. John Vickers & George Yarrow, 1988. "Privatization: An Economic Analysis," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262720116, December.
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Cited by:
  1. Mohamed Jellal & François-Charles Wolff, 2003. "Privatisation et négociation collective," Revue d’économie du développement, De Boeck Université, vol. 17(1), pages 73-99.

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