A Theory of BOT Concession Contracts

Emmanuelle Auriol and Pierre Picard

DEM Discussion Paper Series from Department of Economics at the University of Luxembourg

Abstract: In this paper, we discuss the choice for build-operate-and-transfer (BOT) concessions when governments and firm managers do not share the same information regarding the operation characteristics of a facility. We show that larger shadow costs of public funds and larger information asymmetries entice governments to choose BOT concessions. This result stems from a trade-off between the government's shadow costs of financing the construction and the operation of the facility and the excessive usage price that the consumer may face during the concession period. The incentives to choose BOT concessions increase as a function of ex-ante informational asymmetries between governments and potential BOT concession holders and with the possibility of transferring the concession cost characteristics to public firms at the termination of the concession.

Keywords: Public-private-partnership; privatization; adverse selection; regulation; natural monopoly; infrastructure; facilities. (search for similar items in EconPapers)
JEL-codes: D82 L33 L43 L51 (search for similar items in EconPapers)
Date: 2011
New Economics Papers: this item is included in nep-cta, nep-ppm and nep-reg
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (8)

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http://wwwfr.uni.lu/content/download/35483/427122/ ... sion%20Contracts.pdf (application/pdf)

Related works:
Journal Article: A theory of BOT concession contracts (2013)
Working Paper: A theory of BOT concession contracts (2013)
Working Paper: A theory of BOT concession contracts (2011)
Working Paper: A Theory of BOT Concession Contracts (2011)
Working Paper: A Theory of BOT Concession Contracts (2011)
Working Paper: A Theory of BOT Concession Contracts (2011)
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Persistent link: https://EconPapers.repec.org/RePEc:luc:wpaper:11-04

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