Incomplete contracts and privatization

Klaus Schmidt (klaus.schmidt@lrz.uni-muenchen.de)

Munich Reprints in Economics from University of Munich, Department of Economics

Abstract: The paper offers a selective survey on the incomplete contracts approach to privatization. Furthermore, a simple model of privatization to an owner-manager is developed in which different allocations of ownership rights lead to different allocations of inside information about the firm which in turn affect allocative and productive efficiency. In this model, privatization is a commitment device of the government to credibly reward the manager for a successful cost reduction and to harden his budget constraint.

Date: 1996
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Citations: View citations in EconPapers (176)

Published in European Economic Review 3-5 40(1996): pp. 569-579

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Persistent link: https://EconPapers.repec.org/RePEc:lmu:muenar:19776

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