Strategic Interaction between Governments and Investors under Privatization Programs
Article first published online: 19 OCT 2011
Copyright © 2011 John Wiley & Sons, Ltd.
Managerial and Decision Economics
Volume 33, Issue 1, pages 29–38, January 2012
How to Cite
El-Shazly, A. (2012), Strategic Interaction between Governments and Investors under Privatization Programs. Manage. Decis. Econ., 33: 29–38. doi: 10.1002/mde.1557
- Issue published online: 6 DEC 2011
- Article first published online: 19 OCT 2011
- Sequential games;
- Information structure;
- Bounded rationality
This article analyses the strategic moves of governments and investors under privatization programs in a game-theoretic context. In sequential-move games of both perfect information and incomplete information, the best response of the strategic investors to observing a slow pace of privatization is to have a low participation in economic activity because of concerns over public policy credibility. This is true even if the government chooses to randomize its action to send mixed signals to the investors while adopting a slow pace of privatization for budgetary reasons. However, the outcome is Pareto inferior to a situation of phased but fast implementation of privatization programs and high private-sector participation under plausible assumptions. Copyright © 2011 John Wiley & Sons, Ltd.