Markets,property rights,and the economics of joint ventures in socialist countries

This paper develops formal models of joint ventures between Western firms and enterprises in three socialist countries, Hungary, Rumania, and Yugoslavia. In each case, the optimal resource allocations from the point of view of each partner are derived. In all cases, we find that the desired resource allocations are suboptimal and are strongly influenced by the structure of property rights in the socialist economy and the extent to which that economy makes use of markets to determine prices.