Designing and Optimal Privatisation Plan for Restructuring Firms and Institutes in Transition

• Published in: Journal of Comparative Economics Vol. 21; no. 1; pp. 1 - 28
• Main Authors: Katz, B.G., Owen, J.
• Format: Journal Article
• Language: English
• Published: Elsevier Inc 01-08-1995; Elsevier
• Series: Journal of Comparative Economics
• ISSN: 0147-5967; 1095-7227
• DOI: 10.1006/jcec.1995.1025

A privitization authority (PA) wishes to establish and find buyers for firms it creates in those industries. Agents, facing a privatization plan specifying the percentage of ownership offered, payment (subsidy) required, and number of firms per industry, maximise expected utility which depends on profit, effort, and a random element. The PA selects the Stackelberg-optimal plan. We show the existence of this plan and conditions for uniqueness. We provide conditions under which subsidies are necessary and additional ownership must be offered as a further incentive. A lower bound on an agent′s ownership share is derived; optimal sizes of industries are established. J. Comp. Econom., August 1995, 21(1), pp. 1-28, New York University, New York, New York 10012.