Partial Privatization and Incomplete Contracts

The Proper Scope of Government Reconsidered

Bibliographic Data

ID24049355
AuthorsPatrick W Schmitz (0000-0003-3461-5102, corresponding author)
Year2001
Volume57
Issue4
Pages394-411
Publication date2001-01-01
Peer ReviewedYes
Open AccessNo
TypeARTICLE
VenueFinanzArchiv (JOURNAL)
Journal identifiersISSN: 0015-2218 • E-ISSN: 1614-0974
PublisherMohr Siebeck (PUBLISHER)
DOI10.1628/0015221012904869
OpenAlexW3022582291
LanguageEN
Citations received5

In this paper it is argued that privatization is not the only alternative to public ownership. Adopting the incomplete contract approach, it is shown that partial privatization may well be the optimal ownership structure. While in the standard incomplete contract model joint ownership is usually suboptimal, it is shown here that joint ownership in the form of partial privatization can be optimal since it mitigates the disadvantages of public ownership (no incentives to improve quality if the manager invests or too strong incentives if the government invests) and of privatization (too strong incentives for the manager to reduce costs).

Business · Economics · Government (linguistics) · Incentive · Incomplete contracts · Market economy · Microeconomics · Mixed economy · Public economics · Public ownership · Quality (philosophy) · Scope (computer science) · Fiscal Policy and Economic Growth · Law, Economics, and Judicial Systems · Local Government Finance and Decentralization

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