IDEAS home Printed from https://ideas.repec.org/p/wpa/wuwpio/9601001.html

An Efficient Privatization Mechanism

Author

Listed:
  • Nejat Anbarci

    (Florida International University)

  • Mehmet E. Karaaslan

    (Alfred University)

Abstract

In this paper, we consider the privatization of State-Owned Enterprises (SOEs) that are legal monopolies but not natural monopolies; their markets can be opened to competition once privatization takes place and other competitors can emerge and compete successfully against them in a few years. But until that happens, these privatized SOEs can have a significant level of market power. The currently used "Revenue Maximization (RM)" privatization scheme maximizes the government revenue from privatization but does not provide sufficient incentives for the privatized SOE eiher to charge a price lower than the monopoly price or to improve production efficiency until competition arises. We propose a new scheme to privatize such SOEs. We term this new scheme the "Welfare Maximization (WM)" scheme. The WM scheme practically yields no revenue to the government from the privatization of any such SOE; however, it induces the privatized SOE to charge a competitive price in the absence of any regulation. It also turns out that the WM scheme provides greater incentives for post-privatization process invention (i.e., for post- privatization cost reduction) than RM scheme.

Suggested Citation

  • Nejat Anbarci & Mehmet E. Karaaslan, 1996. "An Efficient Privatization Mechanism," Industrial Organization 9601001, University Library of Munich, Germany.
    • Handle: RePEc:wpa:wuwpio:9601001
    Note: Acrobat file; 17 pages
    as

    Download full text from publisher

    File URL: https://econwpa.ub.uni-muenchen.de/econ-wp/io/papers/9601/9601001.pdf
    Download Restriction: no
    File URL: https://econwpa.ub.uni-muenchen.de/econ-wp/io/papers/9601/9601001.ps.gz
    Download Restriction: no
    ---><---

    Other versions of this item:

    References listed on IDEAS

    as
    1. Richard A. Posner, 1972. "The Appropriate Scope of Regulation in the Cable Television Industry," Bell Journal of Economics, The RAND Corporation, vol. 3(1), pages 98-129, Spring.
    2. John Vickers & George Yarrow, 1988. "Privatization: An Economic Analysis," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262720116, December.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Mohamed Jellal & François-Charles Wolff, 2003. "Privatisation et négociation collective," Revue d’économie du développement, De Boeck Université, vol. 11(1), pages 73-99.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Germa Bel & Anton Costas, 2006. "Do Public Sector Reforms Get Rusty? Local Privatization in Spain," Journal of Economic Policy Reform, Taylor & Francis Journals, vol. 9(1), pages 1-24.
    2. N.F. Cruz & R.C. Marques & A. Marra & C. Pozzi, 2014. "Local Mixed Companies: The Theory And Practice In An International Perspective," Annals of Public and Cooperative Economics, Wiley Blackwell, vol. 85(1), pages 1-9, March.
    3. Luc Baumstark & Claude Ménard & William Roy & Anne Yvrande-Billon, 2005. "Modes de gestion et efficience des opérateurs dans le secteur des transports urbains de personnes," Post-Print halshs-00103116, HAL.
    4. Orietta DESSY & Massimo FLORIO, 2004. "Workers' earnings in the UK before and after privatisation: a study of five industries," Departmental Working Papers 2004-13, Department of Economics, Management and Quantitative Methods at Università degli Studi di Milano.
    5. Diane Sharratt & Bitten H. Brigham & Martin Brigham, 2007. "The Utility of Social Obligations in the UK Energy Industry," Journal of Management Studies, Wiley Blackwell, vol. 44(8), pages 1503-1522, December.
    6. Michael A. Crew & Paul R. Kleindorfer, 2013. "Privatization of postal operators: old arguments and new realities," Chapters, in: Michael A. Crew & Paul R. Kleindorfer (ed.), Reforming the Postal Sector in the Face of Electronic Competition, chapter 1, pages 1-19, Edward Elgar Publishing.
    7. James A. Schmitz, 1996. "The role played by public enterprises: how much does it differ across countries?," Quarterly Review, Federal Reserve Bank of Minneapolis, vol. 20(Spr), pages 2-15.
    8. Paul Walker, 2016. "From complete to incomplete (contracts): A survey of the mainstream approach to the theory of privatisation," New Zealand Economic Papers, Taylor & Francis Journals, vol. 50(2), pages 212-229, August.
    9. A. Brandão & S. Castro, 2007. "State-owned enterprises as indirect instruments of entry regulation," Journal of Economics, Springer, vol. 92(3), pages 263-274, December.
    10. Matsumura, Toshihiro, 1998. "Partial privatization in mixed duopoly," Journal of Public Economics, Elsevier, vol. 70(3), pages 473-483, December.
    11. Evans, Lewis, 1998. "The Theory and Practice of Privatisation," Working Paper Series 3936, Victoria University of Wellington, The New Zealand Institute for the Study of Competition and Regulation.
    12. Boudreaux, Christopher, 2019. "Do private enterprises outperform state enterprises in an emerging market? The importance of institutional context in entrepreneurship," MPRA Paper 93039, University Library of Munich, Germany.
    13. R. Daviddi, 1994. "Privatisation in the transition to a market economy," Banca Nazionale del Lavoro Quarterly Review, Banca Nazionale del Lavoro, vol. 47(191), pages 399-429.
    14. Gong, Stephen X.H. & Cullinane, Kevin & Firth, Michael, 2012. "The impact of airport and seaport privatization on efficiency and performance: A review of the international evidence and implications for developing countries," Transport Policy, Elsevier, vol. 24(C), pages 37-47.
    15. Elisa BORGHI & Chiara DEL BO & Massimo FLORIO, 2010. "The theory of public enterprise, social welfare and planning: a note," Departmental Working Papers 2010-20, Department of Economics, Management and Quantitative Methods at Università degli Studi di Milano.
    16. Maria Moschandreas, 1997. "The Role of Opportunism in Transaction Cost Economics," Journal of Economic Issues, Taylor & Francis Journals, vol. 31(1), pages 39-58, March.
    17. Jamasb, T. & Pollitt, M., 2000. "Benchmarking and regulation: international electricity experience," Utilities Policy, Elsevier, vol. 9(3), pages 107-130, September.
    18. Kenneth Button, 2016. "Public--private partnerships: a review of economic considerations with particular reference to transportation projects," Transportation Planning and Technology, Taylor & Francis Journals, vol. 39(2), pages 136-161, March.
    19. Ba, Lika & Gasmi, Farid, 2011. "To what extent do infrastructure and financial sectors reforms interplay? Evidence from panel data on the power sector in developing countries," IDEI Working Papers 692, Institut d'Économie Industrielle (IDEI), Toulouse.
    20. Alberto Cavaliere & Simona Scabrosetti, 2008. "Privatization And Efficiency: From Principals And Agents To Political Economy," Journal of Economic Surveys, Wiley Blackwell, vol. 22(4), pages 685-710, September.

    More about this item

    JEL classification:

    • L - Industrial Organization

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:wpa:wuwpio:9601001. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: EconWPA The email address of this maintainer does not seem to be valid anymore. Please ask EconWPA to update the entry or send us the correct address (email available below). General contact details of provider: https://econwpa.ub.uni-muenchen.de .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.