In many transition economies, insiders controlled state-owned firms, de facto. For such firms, we model the decision about privatization method, focusing on the choice between free distribution (so called ‘mass privatization’) and management-employee buyouts. We incorporate a political...

In their privatization programs, transition governments have frequently given away shares (so-called 'mass privatization'), while maintaining significant minority ownership. We explain the rationality of this behavior for an expected net-revenue maximizing government. Our argument rests on a...

A model is developed in which an industry of firms is privatised. The 'participation' method of privatisation is used, whereby firms are sold for cash, but the state retains a proportionate share of ownership. In each firm the new private owner has the opportunity to make a reorganisational...