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Reputation, control rights and game equilibrium -A game analytical framework and application to SOEs in China

Author

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  • LI Junlin

    (School of Economics, Renmin University of China, Beijing 100872, China)

  • LI Tianyou

    (School of Economics, Renmin University of China, Beijing 100872, China)

Abstract

Using the reputation model of Kreps (1982), Vickers (1986) and Barro(1986), we develop a dynamic game model with incomplete information to examine the relations between the managers of state-owned enterprises(SOEs) in China and the government as the enterprise¡¯s owner. Employing the model, we show that even a noncoopertive manager will not intrude the owner¡¯s interests until the last period of his term in order to maximize his long term utility. The paper also discusses some phenomenona in state-owned enterprises in China, such as ¡°insiders¡¯ control¡±, ¡°59 phenomenon¡± and excess on-the-job consumption.

Suggested Citation

  • LI Junlin & LI Tianyou, 2008. "Reputation, control rights and game equilibrium -A game analytical framework and application to SOEs in China," Frontiers of Economics in China-Selected Publications from Chinese Universities, Higher Education Press, vol. 3(4), pages 513-530, December.
    • Handle: RePEc:fec:journl:v:3:y:2008:i:4:p:513-530
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    File URL: http://journal.hep.com.cn/fec/EN/10.1007/s11459-008-0025-5
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    More about this item

    Keywords

    reputation; control rights; SOEs; equilibrium;
    All these keywords.

    JEL classification:

    • L14 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Transactional Relationships; Contracts and Reputation
    • L29 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Other
    • C73 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Stochastic and Dynamic Games; Evolutionary Games

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