privitisation

• what is privatisation?

  the selling of state owned assets to the private sector
• what are some advantages of privitisation?

  • dynamically efficient they can reinvest greater amount of supernormal profits
  • allocatively efficient given the increased competition they will be incentivised to charge lower prices thus increasing consumer surplus
  • government revenue from sale shares
• what is privitisation used for ?

  to promote competition and contestability as firms are less hesitant since its not a government owned firm and has access to gov resources
• what are disadvantages of privitisation?

  • regulatory capture>where regulators might overlook private firms
  • profit motive
  • some firms should stay state owned e.g NHS
  • foreign investors will be in control of british assets
• evaluation points?

  • depends on level of competition post privitisation
  • level of government regulation