Motivating wealth-constrained actors

We examine how owners of productive resources (e.g., public enterprises or financial capital) optimally allocate their resources among wealth-constrai ned operators of unknown ability. Optimal allocations exhibit: (I) shared e nterprise profit-the resource owner always shares the operator's profit; (2 ) dispersed enterprise ownership-resources are widely distributed among ope rators of varying ability; (3) limited benefits of competition-the owner ma y not benefit from increased competition for the resource; and, sometimes, (4) diluted incentives for the most capable-more capable operators receive smaller shares of the returns they generate. Implications for privatization s and venture capital arrangements are explored. (JEL D82, D44, D20).