A Theory of BOT Concession Contracts

Emmanuelle Auriol () and Pierre M. Picard ()

CREA Discussion Paper Series from Center for Research in Economic Analysis, 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: L43 L51 D82 L33 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-cta, nep-ppm and nep-reg
Date: 2011
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http://wwwfr.uni.lu/content/download/35483/427122/ ... sion%20Contracts.pdf (application/pdf)

Related works:
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: http://EconPapers.repec.org/RePEc:luc:wpaper:11-04

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