Government Outsourcing: Public Contracting with Private Monopoly

Emmanuelle Auriol () and Pierre M. Picard ()

No 5643, CEPR Discussion Papers from C.E.P.R. Discussion Papers

Abstract: The paper studies the impact of government budget constraint in a pure adverse selection problem of monopoly regulation. The government maximizes total surplus but incurs some cost of public funds à la Laffont and Tirole (1993). An alternative to regulation is proposed in which firms are free to enter the market and to choose their price and output levels. However the government can contract ex-post with the private firms. This ex-post contracting set-up allows more flexibility than traditional regulation where governments commit to both investment and operation cash-flows. This is especially relevant in case of high technological uncertainties.

Keywords: adverse selection; natural monopoly; privatization; regulation; soft-budget constraint (search for similar items in EconPapers)
JEL-codes: D82 L33 L43 L51 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-com, nep-cse, nep-mic and nep-reg
Date: 2006-04
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Related works:
Working Paper: Government Outsourcing: Public Contracting with Private Monopoly (2008)
Working Paper: Government Outsourcing: Public Contracting with Private Monopoly (2006)
Journal Article: Government Outsourcing: Public Contracting with Private Monopoly (2009)
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