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Property Rights and Market : Employee Privatization as a Cooperative Bargaining Process

Author

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  • MARINI, Marco

    (CORE, Universite catholique de Louvain, London School of Economics and Political Science and University of Urbino)

Abstract

The paper presents a game-theoretic model to investigate to what extent an employee privatization program of a State owned firm can be feasible under certain assumptions concerning the players' objective functions and the market structure in which the firm operates. The public managers are assumed interested in the firm's value, while the workers aim at maximizing the per capita surplus over the wage. The privatization process is then described as a bargaining process between the government in the role of core investor in the firm's physical assets and the workers of the firm, whose only asset is their personal skill. In the model the market structure in which the firm sells its product is assumed to he imperfectly competitive. After presenting the case of a monopolistic firm, the paper explores what happens if the firm plays a duopoly quantity game. The final section is devoted to introducing to the analysis an x-efficiency cost proportional to the public share of the ownership.

Suggested Citation

  • MARINI, Marco, 1996. "Property Rights and Market : Employee Privatization as a Cooperative Bargaining Process," CORE Discussion Papers 1996023, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
  • Handle: RePEc:cor:louvco:1996023
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    File URL: https://uclouvain.be/en/research-institutes/immaq/core/dp-1996.html
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    References listed on IDEAS

    as
    1. Hart, Oliver & Moore, John, 1990. "Property Rights and the Nature of the Firm," Journal of Political Economy, University of Chicago Press, vol. 98(6), pages 1119-1158, December.
    2. Grosfeld, Irena & Hare, Paul G, 1991. "Privatization in Hungary, Poland and Czechoslovakia," CEPR Discussion Papers 544, C.E.P.R. Discussion Papers.
    3. John Vickers & George Yarrow, 1991. "Economic Perspectives on Privatization," Journal of Economic Perspectives, American Economic Association, vol. 5(2), pages 111-132, Spring.
    4. Klein, Benjamin & Crawford, Robert G & Alchian, Armen A, 1978. "Vertical Integration, Appropriable Rents, and the Competitive Contracting Process," Journal of Law and Economics, University of Chicago Press, vol. 21(2), pages 297-326, October.
    5. Dow, Gregory K, 1993. "Why Capital Hires Labor: A Bargaining Perspective," American Economic Review, American Economic Association, vol. 83(1), pages 118-134, March.
    6. Bonin, John P & Jones, Derek C & Putterman, Louis, 1993. "Theoretical and Empirical Studies of Producer Cooperatives: Will Ever the Twain Meet?," Journal of Economic Literature, American Economic Association, vol. 31(3), pages 1290-1320, September.
    7. Jean Tirole, 1991. "Privatization in Eastern Europe: Incentives and the Economics of Transition," NBER Chapters,in: NBER Macroeconomics Annual 1991, Volume 6, pages 221-268 National Bureau of Economic Research, Inc.
    8. Cremer, Helmuth & Cremer, Jacques, 1992. "Duopoly with employee-controlled and profit-maximizing firms: Bertrand vs Cournot competition," Journal of Comparative Economics, Elsevier, vol. 16(2), pages 241-258, June.
    9. De Fraja, Giovanni, 1991. "Efficiency and Privatisation in Imperfectly Competitive Industries," Journal of Industrial Economics, Wiley Blackwell, vol. 39(3), pages 311-321, March.
    10. Avner BEN-NER, 1993. "ORGANIZATIONAL REFORM IN CENTRAL AND EASTERN EUROPE A Comparative Perspective," Annals of Public and Cooperative Economics, Wiley Blackwell, vol. 64(3), pages 329-366, July.
    11. Svejnar, Jan, 1982. "On the theory of a participatory firm," Journal of Economic Theory, Elsevier, vol. 27(2), pages 313-330, August.
    12. Bonin, John P., 1992. "Privatization and efficient contracts: The workers' stake in the transition," Journal of Comparative Economics, Elsevier, vol. 16(4), pages 716-732, December.
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    More about this item

    Keywords

    Privatization; Labour-Managed Firms; Bargaining;

    JEL classification:

    • C7 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory
    • D23 - Microeconomics - - Production and Organizations - - - Organizational Behavior; Transaction Costs; Property Rights
    • L22 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Firm Organization and Market Structure
    • L33 - Industrial Organization - - Nonprofit Organizations and Public Enterprise - - - Comparison of Public and Private Enterprise and Nonprofit Institutions; Privatization; Contracting Out
    • J5 - Labor and Demographic Economics - - Labor-Management Relations, Trade Unions, and Collective Bargaining

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