Abstract When the property right is not clear, fovourable selection is the market equilibrium of 'lemon market' under the condition of asymmetric information. In order to make sure that the aim buyer can purchase the higher quality assets and obtain the bribe, the seller will provide favorable informations of the assets auctioned to the aim buyer and provide unfavorable informations to the other buyers. In order to reduce the losing of State-Owned assets, Government should punish the malversation, and increase the degree of punishment. Otherwise, incentive mechanism is necessary and effective. But the economic approach is not the thorough method to solve the moral hazard of agency.
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Received: 28 December 2006
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