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A voting model of privatization

Author

Listed:
  • Rim Lahmandi-Ayed

    (UR MASE - Modélisation et Analyse Statistique et Economique - ESSAIT - Ecole Supérieure de la Statistique et de l'Analyse de l'Information - UCAR - Université de Carthage (Tunisie))

  • Didier Laussel

    (AMSE - Aix-Marseille Sciences Economiques - EHESS - École des hautes études en sciences sociales - AMU - Aix Marseille Université - ECM - École Centrale de Marseille - CNRS - Centre National de la Recherche Scientifique)

Abstract

We consider a general equilibrium model with vertical preferences, where workers and consumers are differentiated respectively by their sensitivity to effort and their intensity of preference for quality. We consider a public monopoly, i.e. which is owned equally by all individuals. The question is under which conditions the firm will be privatized and at which rate/price. The decisions are taken through majority vote in a plurality system. When the firm is controlled by the State, the price is determined through a vote among all the population. Otherwise, the price is the one which maximizes the profit. We prove that, under some conditions on the dispersion of consumers relative to workers, privatization may emerge as a possible choice of the majority, even if no hypothesis is made on the efficiency of a private management relative to a public one.

Suggested Citation

  • Rim Lahmandi-Ayed & Didier Laussel, 2020. "A voting model of privatization," Working Papers hal-02504990, HAL.
    • Handle: RePEc:hal:wpaper:hal-02504990
    Note: View the original document on HAL open archive server: https://hal.science/hal-02504990v2
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    References listed on IDEAS

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    More about this item

    Keywords

    democracy; general equilibrium; privatization; vertical preferences; public monopoly JEL codes: D4; majority vote; D5; L2;
    All these keywords.

    JEL classification:

    • D4 - Microeconomics - - Market Structure, Pricing, and Design
    • D5 - Microeconomics - - General Equilibrium and Disequilibrium
    • L2 - Industrial Organization - - Firm Objectives, Organization, and Behavior

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