Methods of Privatization: Auctions, Bargaining, and Giveaways

Conference paper
Part of the Publications of the Egon-Sohmen-Foundation book series (EGON-SOHMEN)


Consider a government that wants to privatize a state-owned enterprise. What method of privatization should it use if it wants to achieve an efficient allocation of ownership rights and generate as much revenue as possible? Most Western countries have employed various kinds of auctions to sell state-owned enterprises to the highest bidder. Some transition countries in Eastern Europe have given away a substantial fraction of the shares of all firms to the general population. In eastern Germany the Treuhandanstalt bargained on the terms of trade with predetermined buyers and negotiated detailed employment and investment guarantees. Most privatization programs combined several elements of these basic methods.


Reserve Price High Bidder Potential Buyer High Valuation English Auction 
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