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We survey the theoretical literature on privatization and efficiency by tracing its evolution from the applications of agency theory to recent contributions in the field of political economy. The former extend the theory of regulation with incomplete information to address privatization issues, comparing state-owned enterprises with private regulated firms. The benefits of privatization may derive either from the constraints it places on malevolent agents or from the impossibility of commitment by a benevolent government because of incomplete contracts. Contributions dealing with political economy issues separate privatization from restructuring decisions. They either explore bargaining between managers and politicians or analyse the impact of privatization shaped by political preferences on efficiency. The theoretical results regarding the relation between privatization and efficiency do not lead to any definitive conclusion. Privatization may increase productive efficiency when restructuring takes place whereas its effects on allocative efficiency still remain uncertain.

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vertical product differentiation, asymmetric information, quality uncertainty, consumers externalities, prices as quality signals., L13, L15,

The strategic analysis of the private provision of a discrete public good has shown the existence of multiple Nash equilibria with the efficient number of players voluntarily contributing. However the coordination issue is left unexplained by this literature. The experimental evidence shows that communication among players is helpful in achieving cooperation. We claim that, from the theoretical point of view, this is equivalent to playing correlated equilibria in an extended public good game with communication, modeled as Chicken. We characterize such equilibria as feasible coordination mechanisms to achieve public goods provision in the general contribution game. We further introduce a second kind of game characterized by payoff externalities that may persist after the minimal threshold of contributors is achieved. While it is easy to show the existence of Pareto efficient correlated equilibria in the first game, in the second one players face incentive problems such that a first best cannot always be an equilibrium. Nevertheless there exist correlated equilibria that can qualify as incentive efficient mechanisms, once free riding is seen as a moral hazard issue. Finally, with an example, we discuss the impact of coalition formation in our framework.

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