Privatisation and Market Structure in a Transition Economy

John Bennett () and James Maw

No 175, William Davidson Institute Working Papers Series from William Davidson Institute at the University of Michigan

Abstract: A model is developed in which an industry of N > I firms is privatized. The 'participation' method of privatization is used, whereby firms are sold for cash, but the state retains a proportionate share of ownership. In each firm the new private owner has the opportunity to make a reorganisational investment, before output Is produced. The investment is unobservable by the state, and therefore noncontractible. Thae Is Cournot competition In the product market. The welfare-maximizing retained ownership share for the state is analyzed; taking into account that potential buyers of firms may have limited access to finance.

Pages: pages
Date: 1998-06-01
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Journal Article: Privatisation and market structure in a transition economy (2000)
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