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A Taxonomy of Optimal Ownership and Management Regimes

  • King, Stephen
  • Pitchford, Rohan

We develop a model to assist policy-makers in their choice between private and public ownership for a broad range of activities, based on managers' ability to divert resources through perks or pet projects. Qualitative information is always required to demonstrate that public ownership is optimal. More 'public' firms are synonymous with greater control of such actions, but generate greater bureaucracy costs. The flat incentives faced by public managers can be socially desirable when commercially productive activities generate large social harms relative to profit, but are undesirable when these activities are either benign or create external social benefits. Applications are discussed. Copyright © 2008 The Economic Society of Australia.

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Paper provided by The Research Institute of the Finnish Economy in its series Discussion Papers with number 684.

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Length: 33 pages
Date of creation: 2002
Date of revision:
Handle: RePEc:rif:dpaper:684
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  1. Stephen King & Rohan Pitchford, 2008. "Private or Public? Towards a Taxonomy of Optimal Ownership and Management Regimes," The Economic Record, The Economic Society of Australia, vol. 84(266), pages 366-377, 09.
  2. Hart, O. & Moore, J., 1989. "Default And Renegotiation: A Dynamic Model Of Debt," Working papers 520, Massachusetts Institute of Technology (MIT), Department of Economics.
  3. Florencio Lopez-de-Silanes & Andrei Shleifer & Robert Vishny, 1997. "Privatization in the United States," RAND Journal of Economics, The RAND Corporation, vol. 28(3), pages 447-471, Autumn.
  4. Oliver Hart & John Moore, 1988. "Property Rights and the Nature of the Firm," Working papers 495, Massachusetts Institute of Technology (MIT), Department of Economics.
  5. Raghuram G. Rajan & Luigi Zingales, 1997. "Power in a Theory of the Firm," NBER Working Papers 6274, National Bureau of Economic Research, Inc.
  6. Oliver Hart & Andrei Shleifer & Robert W. Vishny, 1996. "The Proper Scope of Government: Theory and an Application to Prisons," NBER Working Papers 5744, National Bureau of Economic Research, Inc.
  7. Pitchford, Rohan, 1995. "How Liable Should a Lender Be? The Case of Judgment-Proof Firms and Environmental Risk," American Economic Review, American Economic Association, vol. 85(5), pages 1171-86, December.
  8. Jorde, Thomas M & Teece, David J, 1990. "Innovation and Cooperation: Implications for Competition and Antitrust," Journal of Economic Perspectives, American Economic Association, vol. 4(3), pages 75-96, Summer.
  9. Shapiro, Carl & Willig, Robert D, 1990. "On the Antitrust Treatment of Production Joint Ventures," Journal of Economic Perspectives, American Economic Association, vol. 4(3), pages 113-30, Summer.
  10. Mark Armstrong & Simon Cowan & John Vickers, 1994. "Regulatory Reform: Economic Analysis and British Experience," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262510790, June.
  11. David De Meza & Ben Lockwood, 1998. "Does Asset Ownership Always Motivate Managers? Outside Options And The Property Rights Theory Of The Firm," The Quarterly Journal of Economics, MIT Press, vol. 113(2), pages 361-386, May.
  12. 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.
  13. Suzumura, Kotaro, 1992. "Cooperative and Noncooperative R&D in an Oligopoly with Spillovers," American Economic Review, American Economic Association, vol. 82(5), pages 1307-20, December.
  14. Stephen King & Rohan Pitchford, 2001. "Private or Public? A taxonomy of optimal ownership and management regimes," International and Development Economics Working Papers idec01-5, International and Development Economics.
  15. Schmidt, Klaus M., 1996. "The costs and benefits of privatization: An incomplete contracts approach," Munich Reprints in Economics 19773, University of Munich, Department of Economics.
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