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Government versus private ownership of public goods: The role of bargaining frictions

Patrick Schmitz

No 10686, CEPR Discussion Papers from C.E.P.R. Discussion Papers

Abstract: The government and a non-governmental organization (NGO) can invest in the provision of a public good. Who should be the owner of the public project? In an incomplete contracting model in which ex post negotiations are without frictions, the party that values the public good most should be the owner, regardless of technological aspects. However, under the plausible assumption that there are bargaining frictions, the optimal ownership structure depends on technological aspects and on the parties' valuations. We show that the differences between incomplete contracting models with public goods and private goods are thus smaller than has previously been thought.

Keywords: bargaining frictions; incomplete contracts; investment incentives; ownership; public goods (search for similar items in EconPapers)
JEL-codes: C78 D23 D86 H41 L31 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-mic
Date: 2015-07
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