Concession contract renegotiations: some efficiency versus equity dilemmas

Antonio Estache and Lucía Quesada

No 2705, Policy Research Working Paper Series from The World Bank

Abstract: The authors analyze the possibility of tradeoffs between efficiency and equity as well as the possibility of distributional conflicts in the context of renegotiation of infrastructure contracts in developing countries. To do so, they present a model in which contracts are awarded by auctioning the right to operate an infrastructure service to a private monopoly, and consider the possibility of renegotiation. To identify the potential sources of tradeoffs, they trackthe possible outcomes of different renegotiation strategies for the monopoly running the concession and for the two groups of consumers-rich and poor-who alternate in power according to a majority voting rule. Among the model? most important policy implications is this: if having firm-driven renegotiations is a major concern, efficiency should not be the only consideration in selecting an operator. Indeed, consumers may want to award the concession to a less efficient firm if that would reduce the probability of renegotiation, since a lower probability of firm-driven renegotiations (due to demand shocks, for example) is associated with higher welfare for all service users.

Keywords: Environmental Economics&Policies; Labor Policies; Markets and Market Access; Economic Theory&Research; International Terrorism&Counterterrorism; Economic Theory&Research; Environmental Economics&Policies; Markets and Market Access; Access to Markets; International Terrorism&Counterterrorism (search for similar items in EconPapers)
Date: 2001-11-30
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (15)

Downloads: (external link)
http://www-wds.worldbank.org/external/default/WDSC ... d/PDF/multi0page.pdf (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:wbk:wbrwps:2705

Access Statistics for this paper

More papers in Policy Research Working Paper Series from The World Bank 1818 H Street, N.W., Washington, DC 20433. Contact information at EDIRC.
Bibliographic data for series maintained by Roula I. Yazigi ().