The Performance of Public and Private Enterprise under Conditions of Active and Passive Ownership and Competition and Monopoly |
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Authors: | Johan Willner David Parker |
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Institution: | 1.Department of Economics and Statistics,?bo Akademi University,Turku,Finland;2.Cranfield School of Management,Cranfield University,UK |
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Abstract: | Privatisation is driven by the belief that public ownership is cost inefficient, in particular under monopoly. However, some
theoretical and empirical studies have questioned whether privatisation will necessarily lead to efficiency gains. This paper
focuses on the impact of ownership when owners can be either active or passive. Active owners decide on output, whereas passive
owners delegate this decision to a risk-averse manager. It turns out that managerial slack as reflected in the marginal costs
will actually be the same or higher in a private monopoly than under public ownership. The impact of entry is theoretically
ambiguous, but an increased number of firms in an oligopoly may lead to lower efficiency. |
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Keywords: | privatisation public ownership managerial slack |
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