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A note on fixed and flexible-term contracts

Daniel Danau ()

Economics Bulletin, 2009, vol. 29, issue 2, 964-975

Abstract: Engel et al. (1997 2001 2007) have proposed flexible-term contracts as a solution to suboptimal renegotiation of public-private partnerships. We show that whenever the uncertainty lasts over more than two periods, flexible-term contracts have a drawback. The expected duration of a flexible-term contract can be higher than the (certain) duration of a fixed-term contract, the difference being directly proportional to the volatility of the project.

Keywords: public-private; partnerships (search for similar items in EconPapers)
JEL-codes: D8 (search for similar items in EconPapers)
Date: 2009-05-15
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