Analyzing risk in PPP provision of utility services: A social welfare perspective

Mark A. Moore, Anthony Boardman and Aidan Vining

Utilities Policy, 2017, vol. 48, issue C, 210-218

Abstract: This paper analyzes the trade-offs between the social cost of risk bearing and incentive effects for technical efficiency in PPP contracts for utilities. Using a principal-agent perspective and assuming the government principal maximizes social welfare, the government should be risk neutral. It is inefficient for PPP agents to provide financing. Design/build offers the greatest potential PPP gains, but not necessarily more than fixed-price contracts. There may also be efficiency benefits during the operations phase. But, if agents have little control over revenues, then PPP operation creates substantial risk-bearing costs for agents.

Keywords: Public-private partnerships; Risk allocation; Social welfare; Principal-agent (search for similar items in EconPapers)
Date: 2017
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Citations: View citations in EconPapers (6)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:juipol:v:48:y:2017:i:c:p:210-218

DOI: 10.1016/j.jup.2017.08.008

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