The present tendency to privatise and deregulate is largely explained by the widespread view that public ownership is inefficient, in particular under monopoly. The empirical research is fairly inconclusive, however, and the same can be said about the theoretical literature.Our starting point that the previous literature on privatisation and performance is inconclusive is in itself controversial and section 2 therefore details the relevant literature. Section 3 then presents a model of managerial slack under conditions of asymmetric information. Using this model, section 4 compares the performance of firms that differ only with respect to ownership; while section 5 extends the main analysis to topics like regulation and risk-aversion. Section 6 provides concluding remarks.
Manchester, UK, CRC Working Paper, No. 22, 34 pp.