An Agency Perspective on the Costs and Benefits of Privatization

David Martimort

Journal of Regulatory Economics, 2006, vol. 30, issue 1, 5-44

Abstract: This paper proposes a unified theoretical framework to discuss the costs and benefits of privatization using the recent advances of Incentive Theory. I begin by presenting a simple model in which the State (the principal) delegates a task (e.g., the production of a public good) to the private sector (the agent). I give and discuss conditions for the “Irrelevance Theorem” due to Sappington and Stiglitz [Sappington, D., & Stiglitz, J. (1987) Journal of Policy Analysis and Management, 6, 567–582] to hold under complete contracting. I then show how various contract incompletenesses can make either public or private ownership optimal. Finally, I provide critical assessments of these results. Copyright Springer Science+Business Media, LLC 2006

Keywords: Privatization; Regulation; Agency Costs; Incentives; L51 (search for similar items in EconPapers)
Date: 2006
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Citations: View citations in EconPapers (46)

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DOI: 10.1007/s11149-006-0007-4

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