An efficient privatization mechanism

Nejat Anbarcia and Mehmet E. Karaaslanb
Authors registered in the RePEc Author Service: Nejat Anbarci ()

Journal of Economic Policy Reform, 1998, vol. 2, issue 1, 73-87

Abstract: We consider the privatization of State-Owned Enterprises (SOEs) of which markets can be opened to competition once privatization takes place and competitors can compete successfully against them in a few years. The currently used “Revenue Maximization (RM)” scheme maximizes the government revenue from privatization but does not provide incentives for the privatized SOE to charge a price lower than the monopoly price until competition arises. We propose the “Welfare Maximization (WM)” scheme, which induces the privatized SOE to charge a competitive price without resorting to regulation. Also, WM provides greater incentives for post-privatization cost reduction.

Date: 1998
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Working Paper: An Efficient Privatization Mechanism (1996)
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DOI: 10.1080/13841289808523374

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