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Incomplete contracts and privatization

  • Schmidt, Klaus M.

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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File URL: http://www.sciencedirect.com/science/article/B6V64-3VW8NC3-H/2/82ad5c978fea1c7ac65610334066bed3
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Article provided by Elsevier in its journal European Economic Review.

Volume (Year): 40 (1996)
Issue (Month): 3-5 (April)
Pages: 569-579

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Handle: RePEc:eee:eecrev:v:40:y:1996:i:3-5:p:569-579
Contact details of provider: Web page: http://www.elsevier.com/locate/eer

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  1. Oliver Hart & Sanford Grossman, 1985. "The Costs and Benefits of Ownership: A Theory of Vertical and Lateral Integration," Working papers 372, Massachusetts Institute of Technology (MIT), Department of Economics.
  2. 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.
  3. Aghion, Philippe & Dewatripont, Mathias & Rey, Patrick, 1994. "Renegotiation Design with Unverifiable Information," Scholarly Articles 12375014, Harvard University Department of Economics.
  4. Schmidt,Klaus M., 1991. "The costs and benefits of privatization," Discussion Paper Serie A 330, University of Bonn, Germany.
  5. Baron, David P & Myerson, Roger B, 1982. "Regulating a Monopolist with Unknown Costs," Econometrica, Econometric Society, vol. 50(4), pages 911-30, July.
  6. Nöldeke, Georg & Schmidt, Klaus M., 1995. "Option contracts and renegotiation: A solution to the Hold-Up Problem," Munich Reprints in Economics 19329, University of Munich, Department of Economics.
  7. Shleifer, Andrei & Vishny, Robert W, 1994. "Politicians and Firms," The Quarterly Journal of Economics, MIT Press, vol. 109(4), pages 995-1025, November.
  8. David E. M. Sappington & Joseph E. Stiglitz, 1987. "Privatization, information and incentives," Journal of Policy Analysis and Management, John Wiley & Sons, Ltd., vol. 6(4), pages 567-585.
  9. 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, vol. 49(2), pages 403-52, June.
  10. Shapiro, C. & Willing, D.R., 1990. "Economic Rationales For The Scope Of Privatization," Papers 41, Princeton, Woodrow Wilson School - Discussion Paper.
  11. Laffont, Jean-Jacques & Tirole, Jean, 1991. "Privatization and Incentives," Journal of Law, Economics and Organization, Oxford University Press, vol. 7(0), pages 84-105, Special I.
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