Incomplete contracts and optimal ownership of public goods

Patrick Schmitz

No 9141, CEPR Discussion Papers from Centre for Economic Policy Research

Abstract: The government and a non-governmental organization (NGO) can invest in the provision of a public good. In an incomplete contracting framework, Besley and Ghatak (2001) have argued that the party who values the public good most should be the owner. We show that this conclusion relies on their assumption that the parties split the renegotiation surplus 50:50. If the generalized Nash bargaining solution is applied, then for any pair of valuations that the two parties may have, there exist bargaining powers such that either ownership by the government or by the NGO can be optimal.

Keywords: Incomplete contracts; Investment incentives; Ownership; Public goods (search for similar items in EconPapers)
JEL-codes: D23 D86 H41 L31 (search for similar items in EconPapers)
Date: 2012-09
New Economics Papers: this item is included in nep-cta, nep-pbe and nep-pub
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Related works:
Journal Article: Incomplete contracts and optimal ownership of public goods (2013)
Working Paper: Incomplete contracts and optimal ownership of public goods (2012)
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