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How to Design Infrastructure Contracts in a Warming World? A Critical Appraisal of Public-Private Partnerships

David Martimort () and Stephane Straub ()

No 724, IDEI Working Papers from Institut d'Économie Industrielle (IDEI), Toulouse

Abstract: We analyze how uncertainty regarding future climate conditions affects the design of concession contracts, organizational forms and technological choices in a principal-agent context with dynamic moral hazard, limited liability and irreversibility constraints. The prospect of future, uncertain productivity shocks on the returns on the firm’s effort creates an option value of delaying efforts which exacerbates agency costs. Contracts and organizational forms are drafted to control this cost of delegated flexibility. Our analysis is relevant for infrastructure sectors that are sensitive to changing weather conditions and sheds a pessimistic light on the relevance of Public-Private Partnerships in this context.

JEL-codes: D82 L32 Q54 (search for similar items in EconPapers)
Date: 2012-05
New Economics Papers: this item is included in nep-cta
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Related works:
Journal Article: HOW TO DESIGN INFRASTRUCTURE CONTRACTS IN A WARMING WORLD: A CRITICAL APPRAISAL OF PUBLIC–PRIVATE PARTNERSHIPS (2016) Downloads
Working Paper: How to design infrastructure contracts in a warning world: a critical appraisal of public-private partnerships (2016)
Working Paper: How to Design Infrastructure Contracts in a Warming World? A Critical Appraisal of Public-Private Partnerships (2012) Downloads
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