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Incomplete Contracts and Privatization

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  • Klaus M. Schmidt

Abstract

The paper offers a selective survey on the incomplete contracts approach to privatization. Furthermore, a simple model of privatization to an owner-manager is developed in which different allocations of ownership rights lead to different allocations of inside information about the firm which in turn affect allocative and productive efficiency. In this model, privatization is a commitment device of the government to credibly reward the manager for a successful cost reduction and to harden his budget constraint.

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Bibliographic Info

Paper provided by University of Bonn, Germany in its series Discussion Paper Serie A with number 480.

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Length: 15
Date of creation: Mar 1995
Date of revision:
Handle: RePEc:bon:bonsfa:480

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Postal: Bonn Graduate School of Economics, University of Bonn, Adenauerallee 24 - 26, 53113 Bonn, Germany
Fax: +49 228 73 6884
Web page: http://www.bgse.uni-bonn.de

Related research

Keywords: Incomplete Contracts; Privatization; Regulation; Soft Budget Constraint.;

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References

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  1. Shapiro, C. & Willing, D.R., 1990. "Economic Rationales For The Scope Of Privatization," Papers, Princeton, Woodrow Wilson School - Discussion Paper 41, Princeton, Woodrow Wilson School - Discussion Paper.
  2. David P. Baron & Roger B. Myerson, 1979. "Regulating a Monopolist with Unknown Costs," Discussion Papers, Northwestern University, Center for Mathematical Studies in Economics and Management Science 412, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
  3. Schmidt Klaus M. & Schnitzer Monika, 1993. "Privatization and Management Incentives in the Transition Period in Eastern Europe," Journal of Comparative Economics, Elsevier, vol. 17(2), pages 264-287, June.
  4. Georg Noldeke & Klaus M. Schmidt, 1995. "Option Contracts and Renegotiation: A Solution to the Hold-Up Problem," RAND Journal of Economics, The RAND Corporation, vol. 26(2), pages 163-179, Summer.
  5. Oliver Hart & Sanford Grossman, 1985. "The Costs and Benefits of Ownership: A Theory of Vertical and Lateral Integration," Working papers, Massachusetts Institute of Technology (MIT), Department of Economics 372, Massachusetts Institute of Technology (MIT), Department of Economics.
  6. Jean-Jacques Laffont & Jean Tirole, 1991. "Privatization and Incentives," Working papers, Massachusetts Institute of Technology (MIT), Department of Economics 572, Massachusetts Institute of Technology (MIT), Department of Economics.
  7. Klaus M. Schmidt, 1990. "The Costs and Benefits of Privatization," Discussion Paper Serie A, University of Bonn, Germany 287, University of Bonn, Germany.
  8. Mathias Dewatripont & Philippe Aghion & Patrick Rey, 1994. "Renegotiation design with unverifiable information," ULB Institutional Repository 2013/9591, ULB -- Universite Libre de Bruxelles.
  9. Aghion, Philippe & Dewatripont, Mathias & Rey, Patrick, 1994. "Renegotiation Design with Unverifiable Information," Scholarly Articles 12375014, Harvard University Department of Economics.
  10. David E. M. Sappington & Joseph E. Stiglitz, 1987. "Privatization, Information and Incentives," NBER Working Papers 2196, National Bureau of Economic Research, Inc.
  11. Shleifer, Andrei & Vishny, Robert W, 1994. "Politicians and Firms," The Quarterly Journal of Economics, MIT Press, MIT Press, vol. 109(4), pages 995-1025, November.
  12. Megginson, William L & Nash, Robert C & van Randenborgh, Matthias, 1994. " The Financial and Operating Performance of Newly Privatized Firms: An International Empirical Analysis," Journal of Finance, American Finance Association, American Finance Association, vol. 49(2), pages 403-52, June.
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