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An efficient privatization mechanism

Author

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  • Nejat Anbarcia
  • Mehmet E. Karaaslanb

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.

Suggested Citation

  • Nejat Anbarcia & Mehmet E. Karaaslanb, 1998. "An efficient privatization mechanism," Journal of Economic Policy Reform, Taylor & Francis Journals, vol. 2(1), pages 73-87.
    • Handle: RePEc:taf:jpolrf:v:2:y:1998:i:1:p:73-87
    DOI: 10.1080/13841289808523374
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    References listed on IDEAS

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    1. Richard A. Posner, 1972. "The Appropriate Scope of Regulation in the Cable Television Industry," Bell Journal of Economics, The RAND Corporation, vol. 3(1), pages 98-129, Spring.
    2. John Vickers & George Yarrow, 1988. "Privatization: An Economic Analysis," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262720116, April.
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    Cited by:

    1. Mohamed Jellal & François-Charles Wolff, 2003. "Privatisation et négociation collective," Revue d’économie du développement, De Boeck Université, vol. 11(1), pages 73-99.

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