Do Exit Options Increase the Value-For-Money of Public-Private Partnerships?

Marco Buso, Cesare Dosi and Michele Moretto

No 305206, 2030 Agenda from Fondazione Eni Enrico Mattei (FEEM)

Abstract: We study the effects of granting an exit option that enables the private party to early terminate a PPP project if it turns out to be financially loss-making. In a continuous-time setting with hidden information about operating profits, we show that an exit option, acting as a risk-sharing device, can soften agency problems and, in so doing, accelerate investment and increase the government's expected payoff, even while taking into account the costs that the public sector will have to meet in the future to take direct responsibility on service provision.

Keywords: Institutional; and; Behavioral; Economics (search for similar items in EconPapers)
Pages: 46
Date: 2020-09-15
New Economics Papers: this item is included in nep-ppm
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https://ageconsearch.umn.edu/record/305206/files/NDL2020-003.pdf (application/pdf)

Related works:
Journal Article: Do exit options increase the value for money of public–private partnerships? (2021)
Working Paper: Do Exit Options Increase the Value-For-Money of Public-Private Partnerships? (2020)
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Persistent link: https://EconPapers.repec.org/RePEc:ags:feemgc:305206

DOI: 10.22004/ag.econ.305206

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