An Efficient Privatization Mechanism

Posted: 20 Feb 1996

See all articles by Nejat Anbarci

Nejat Anbarci

Deakin University - Department of Economics

Mehmet E. Karaaslan

Southwestern University - Department of Economics and Business

Multiple version iconThere are 2 versions of this paper

Date Written: February 1997

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.

JEL Classification: L33, P21

Suggested Citation

Anbarci, Nejat and Karaaslan, Mehmet E., An Efficient Privatization Mechanism (February 1997). Available at SSRN: https://ssrn.com/abstract=46795

Nejat Anbarci

Deakin University - Department of Economics ( email )

70 Elgar road
Burwood, Victoria 3215
Australia

HOME PAGE: http://www.deakin.edu.au/~nejata/

Mehmet E. Karaaslan (Contact Author)

Southwestern University - Department of Economics and Business ( email )

1001 East University Avenue
Georgetown, TX 78626
United States

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