TY - JOUR
T1 - Contestable privatization
AU - Drook-Gal, Bat Sheva
AU - Epstein, Gil S.
AU - Nitzan, Shmuel
PY - 2004/7
Y1 - 2004/7
N2 - Our stylized rent-seeking model of privatization elucidates the empirical problems of making and implementing privatization. We treat privatization as a strategic game with the public enterprise's employees and an outside investor competing for privatized rents by lobbying. At another level, bureaucrats (the privatizing authority) are concerned with social welfare and the resources spent by the contestants. Our two main results establish that increased selfishness of the government reduces the sale price of the company while increasing the probability of privatization and that a budgetary constraint on the employees' lobbying increases the probability of privatization while reducing the sale price.
AB - Our stylized rent-seeking model of privatization elucidates the empirical problems of making and implementing privatization. We treat privatization as a strategic game with the public enterprise's employees and an outside investor competing for privatized rents by lobbying. At another level, bureaucrats (the privatizing authority) are concerned with social welfare and the resources spent by the contestants. Our two main results establish that increased selfishness of the government reduces the sale price of the company while increasing the probability of privatization and that a budgetary constraint on the employees' lobbying increases the probability of privatization while reducing the sale price.
KW - Budgetary constraints
KW - Endogenous
KW - Equilibrium
UR - http://www.scopus.com/inward/record.url?scp=2642556986&partnerID=8YFLogxK
U2 - 10.1016/j.jebo.2003.11.001
DO - 10.1016/j.jebo.2003.11.001
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AN - SCOPUS:2642556986
SN - 0167-2681
VL - 54
SP - 377
EP - 387
JO - Journal of Economic Behavior and Organization
JF - Journal of Economic Behavior and Organization
IS - 3
ER -