Reputation, control rights and game equilibrium -A game analytical framework and application to SOEs in China

LI Junlin; LI TianyouSchool of Economics, Renmin University of China, Beijing 100872, China

doi:10.1007/s11459-008-0025-5

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Front. Econ. China ›› 2008, Vol. 3 ›› Issue (4) : 513-530. DOI: 10.1007/s11459-008-0025-5

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Reputation, control rights and game equilibrium -A game analytical framework and application to SOEs in China

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Abstract

Using the reputation model of Kreps (1982), Vickers (1986) and Barro(1986), we develop a dynamic game model with incomplete information to examine the relations between the managers of state-owned enterprises(SOEs) in China and the government as the enterprise’s owner. Employing the model, we show that even a noncoopertive manager will not intrude the owner’s interests until the last period of his term in order to maximize his long term utility. The paper also discusses some phenomenona in state-owned enterprises in China, such as “insiders’ control”, “59 phenomenon” and excess on-the-job consumption.

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reputation / control rights / SOEs / equilibrium

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LI Junlin, LI TianyouSchool of Economics, Renmin University of China, Beijing 100872, China. Reputation, control rights and game equilibrium -A game analytical framework and application to SOEs in China. Front Econ Chin, 2008, 3(4): 513‒530 https://doi.org/10.1007/s11459-008-0025-5