Do Exit Options Increase the Value-For-Money of Public-Private Partnerships?

Marco Buso, Cesare Dosi and Michele Moretto
Additional contact information
Marco Buso: Department of Economics and Finance, Catholic University of Sacred Heart and Interuniversity Centre for Public Economics (CRIEP)
Cesare Dosi: Department of Economics and Management, University of Padova and Interuniversity Centre for Public Economics (CRIEP)

No 2020.03, Working Papers from Fondazione Eni Enrico Mattei

Abstract: We study the effects of granting an exit option that enables the private party to early terminate a PPP project if it turns out to be ?financially loss-making. In a continuous-time setting with hidden information about operating profi?ts, we show that an exit option, acting as a risk-sharing device, can soften agency problems and, in so doing, accelerate investment and increase the government?'s expected payoff, even while taking into account the costs that the public sector will have to meet in the future to take direct responsibility on service provision.

Keywords: Public Infrastructure Services; Public-Private Partnerships; Adverse Selection; Real Options; Early Termination Fees (search for similar items in EconPapers)
JEL-codes: D81 D82 D86 H54 (search for similar items in EconPapers)
Date: 2020-08
New Economics Papers: this item is included in nep-ppm
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Related works:
Journal Article: Do exit options increase the value for money of public–private partnerships? (2021)
Working Paper: Do Exit Options Increase the Value-For-Money of Public-Private Partnerships? (2020)
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Persistent link: https://EconPapers.repec.org/RePEc:fem:femwpa:2020.03

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