Optimal Voucher Privatization Fund Bids
When Bidding Affects Firm Performance
by Barbara G. Katz and Joel Owen
Abstract
The voucher portfolio
problem (VPP) is distinctive because the proportion of ownership resulting from
a voucher bid is unknown, and the performance of a privatized firm depends on
its ownership composition. We investigate the VPP when bidders have various
skills in restructuring the firms in which they acquire ownership. We explore
the impact of bidding on performance and derive the optimal ownership pattern.
We show how ownership by voucher funds depends on their skills and voucher
endowments and study conditions under which the most skilled acquire the most
ownership. Finally, we assess the mass privatization plans of the