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Abstract:
We survey the theoretical literature on privatization and efficiency by tracing its evolution from the applications of agency theory to recent contributions in the field of political economy. The former extend the theory of regulation with incomplete information to address privatization issues, comparing state-owned enterprises with private regulated firms. The benefits of privatization may derive either from the constraints it places on malevolent agents or from the impossibility of commitment by a benevolent government because of incomplete contracts. Contributions dealing with political economy issues separate privatization from restructuring decisions. They either explore bargaining between managers and politicians or analyse the impact of privatization shaped by political preferences on efficiency. The theoretical results regarding the relation between privatization and efficiency do not lead to any definitive conclusion. Privatization may increase productive efficiency when restructuring takes place whereas its effects on allocative efficiency still remain uncertain.

Abstract:
We survey the theoretical literature on privatization and efficiency by tracing its evolution from the applications of agency theory to recent contributions in the field of political economy. The first ones extend the theory of regulation with incomplete information to address privatization issues, comparing State Owned Entreprises (SOEs) with private regulated firms. The benefits of privatization may either derive from the constraints it places on malevolent agents or to the impossibility of commitment by a benevolent government because of incomplete contracts. Contributions dealing with political economy issues separate privatization from restructuring decisions. They either explore bargaining between managers and politicians or analyze the impact of privatization shaped by political preferences on efficiency. The theoretical results regarding the relation between privatization and efficiency do not lead to any definitive conclusion. Privatization may increase productive efficiency when restructuring takes place whereas its effects on allocative efficiency still remain uncertain.

Regulation, Imperfect Information, Political Preferences

Abstract:
Voluntary agreements with industry offer many examples of overcompliance with respect to environmental standards. Such phenomena seem to be irrational but appear less surprising considering firms' strategies are aimed to internalise environmental quality. We model the choice of the environmental quality of products in a one-shot game between a monopolist and consumers, to show the existence of inefficient equilibria where quality is low because of moral hazard. The firm can however change its equilibrium strategy in a repeated but finite game, in order to build an environmental reputation if we suppose that consumers' information is not only imperfect with regard to quality, but also incomplete with respect to any environmental constraint that may affect the behaviour of firms (like the threat either of a stricter regulation or of potential entry). In a two-periods model we show the existence of a perfect Bayesian equilibrium in mixed strategies where the firm can revert to the production of green products in order to influence consumers' beliefs and acquire an environmentally friendly reputation. Due to the peculiarity of environmental information (green products are credence goods), we claim that an explicit agreement is also necessary in order to establish monitoring and controlling procedures to verify the performance of firms. These procedures can explain per se the diffusion of voluntary agreements that are nevertheless self-enforcing because of the reputation effect.

Abstract:
In this paper we consider Voluntary Agreements (VAs) as an information-sharing device. In a duopoly model firms compete a la Cournot and aim to reduce environmental damages because consumers have green preferences that partially internalise negative externalities. However both firms are uncertain about the real cost of pollution abatement. We suppose that this kind of uncertainty is completely eliminated if firms subscribe to a Voluntary Agreement and share information. We then represent the decision process as a two stage game where firms first choose to subscribe or not to a Voluntary Agreement and then compete in quantities. Information production and disclosure about costs eliminates production errors as both firms will be able to exactly counter-adjust their output to the output produced by their opponent. Thus profits are always maximized by subscribing to Voluntary Agreements. Concerning social welfare the picture is more complicated because there can be a trade-off between the advantage of voluntary agreements from the point of view of their impact on environmental damages and their social cost in terms of higher prices and lower quantities. Actually, output counter-adjustments are "collusive" and they benefit consumers only to the extent that their direction is such to reduce output and then environmental damages. Thus consumer surplus can increase if the weight of output counter-adjustments is low with respect to output adjustments that are operated by both firms in the same direction. If the weight of output counter-adjustments is higher consumer surplus can increase only if the efficiency of pollution-reducing activities inside firms differs a lot between these same firms. Our results seem to support the view that the great flexibility that voluntary agreements grant to firms with respect to mandatory standards can produce advantages also from the point of view of society.

Abstract:
In this paper we extend the model of vertical product differentiation to also consider information disparities about the extent of quality differences. Equilibrium prices turn out to depend not only on the share of informed consumers but also on uninformed consumers beliefs about quality differences. If uninformed consumers overestimate vertical differentiation, informed consumers exert a positive externality on the purchasers of the high quality good as its price decreases when the share of informed consumers decreases. Considering also that the price of the low quality good increases with the share of informed consumers, higher prices can not signal high quality goods. If uninformed consumers have pessimistic beliefs and underestimate the extent of vertical differentiation, informed consumers can exert a positive externality on firms. In fact either market demands are inelastic to prices and the profits of the high quality firm increase with the share of informed consumers or market demands are elastic to prices and the profits of both firms increase with the share of informed consumers. In the latter case prices are also equal to those that would prevail with perfect information. In the case of optimistic consumers we can then find some theoretical foundation concerning the fact that information undermines brand, while with pessimistic consumers we can explain demand collapses and insensitivity to price changes due to consumer suspicions about product quality.

Vertical product differentiation, Asymmetric information, Quality uncertainty, Prices as quality signals