Editing Privatization (section)

== Economic theory ==
In economic theory, privatization has been studied in the field of [[contract theory]]. When contracts are complete, institutions such as (private or public) property are difficult to explain, since every desired incentive structure can be achieved with sufficiently complex contractual arrangements, regardless of the institutional structure. All that matters is who are the decision makers and what is their available information. In contrast, when contracts are incomplete, institutions matter. A leading application of the incomplete contract paradigm in the context of privatization is the model by [[Oliver Hart (economist)|Hart]], [[Andrei Shleifer|Shleifer]], and [[Robert W. Vishny|Vishny]] (1997).<ref>{{cite journal |title=The Proper Scope of Government: Theory and an Application to Prisons |journal=The Quarterly Journal of Economics |date=1997 |issn=0033-5533 |pages=1127–1161 |volume=112 |issue=4 |doi=10.1162/003355300555448 |language=en |first1=Oliver |last1=Hart |first2=Andrei |last2=Shleifer |first3=Robert W. |last3=Vishny|citeseerx=10.1.1.318.7133 |s2cid=16270301 |url=http://nrs.harvard.edu/urn-3:HUL.InstRepos:30727607 }}</ref> In their model, a manager can make investments to increase quality (but they may also increase costs) and investments to decrease costs (but they may also reduce quality). It turns out that it depends on the particular situation whether private ownership or public ownership is desirable. The Hart-Shleifer-Vishny model has been further developed in various directions, e.g. to allow for mixed public-private ownership and endogenous assignments of the investment tasks.<ref>{{Cite journal |title=Public versus private ownership: Quantity contracts and the allocation of investment tasks |journal=Journal of Public Economics |date=2010 |pages=258–268 |volume=94 |issue=3–4 |doi=10.1016/j.jpubeco.2009.11.009 |first1=Eva I. |last1=Hoppe |first2=Patrick W. |last2=Schmitz}}</ref>