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

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.