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Privatization and Restructuring: An Incomplete-Contract Approach
Author:
Mr. Dieter Bös null

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Series:
IMF Working Papers
Volume/Issue:
Volume 1996: Issue 101
Language:
English
Publication Date:
01 Sep 1996
DOI:
https://doi.org/10.5089/9781451852486.001
ISBN:
9781451852486
ISSN:
1018-5941
Pages:
20
Keywords:
WP; privatization agency; utility function; restructuring investment; key-sector enterprise; restructuring effort; private buyer; net value; Privatization
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IMF Working Papers describe research in progress by the author(s) and are published to elicit comments and to encourage debate. The views expressed in IMF Working Papers are those of the author(s) and do not necessarily represent the views of the IMF, its Executive Board, or IMF management.
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Since an enterprise, which is to be privatized, has to be restructured in uncertainty, and the restructuring investments are sunk when the final decision on the sale price is taken, there is an imminent danger that restructuring is not efficient, and there is underinvestment. We consider, restructuring by the private buyer of the firm, by a government privatization agency, and by both. In the first two cases—one-sided restructuring—a first best can be achieved. In the case of both-sided restructuring, however, the first best cannot be reached if both parties engage in restructuring after signing the contract.
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Cover IMF Working Papers
IMF Working Papers
ISSN:
1018-5941
Publisher:
International Monetary Fund