Three essays in microeconomics of public enterprises under asymmetric information and uncertainty

In Chapter 1, we present a model describing the control of a single public enterprise in a less developed country environment, through the imposition of an allocation scheme--consisting of an output target at a particular unit cost--by a central planner. We assume information asymmetry with a private information bearing enterprise manager and an uninformed central planner. The central planner is treated as the principal and the manager is treated as an agent in a principal-agent model where incompatible interests arise because the manager is able to keep the information private; for his effort level in the production process cannot be observed by the central planner. Out of this situation, we characterize an incentive compatible contract which specifies two decision variables and a transfer payment. Results characterize a general class of two variable contracts imposed through a transfer payment. Among the specific results we find that there is excess variability in capacity utilization and that within the context of the contract the cost due to asymmetric information is minimal to the society if the actual productivity of the firm is high. The results depend on the assumed regularity conditions and are obtained for a continuous space.;Unless all contracts of the above sort are known from the outset, intermediate goods and many other goods are unreliably supplied in planned economies. The second essay examines the effect of a random supply of intermediate goods on the final producers. We show input hoarding, production breakdown and inventory pile up.;In Chapter 3, we discuss the possibility of use of an iterative planning process to correct the distortionary effects of information asymmetry. We find that under partial rationing with an open market for the non-rationed good and explicit pricing of the rationed good, we obtain convergence to the optimal allocation and truth telling upon convergence. However, for full rationing under asymmetric information, we find the usual iterative processes do not converge and quickly become infeasible.