Public-Private Partnership: Information Externality in Sequential Investments

Marco Buso ()
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Marco Buso: University of Padova

No 176, "Marco Fanno" Working Papers from Dipartimento di Scienze Economiche "Marco Fanno"

Abstract: This paper studies the benefit coming from bundling two sequential activities in a context of Public Private Partnerships (PPPs). Differently from previous literature, I introduce a source of asymmetric information in the form of an externality parameter linking the building stage with subsequent operational activity. Within this framework, PPPs allow the government to extract private information about the sign and magnitude of the externality parameter and to to minimize the informational rents needed to incentivize the builder's effort. Our results suggest how PPPs can become those commitment devices that force governments to define more coherent and informed plans that optimize the first period welfare, improving investment to reduce unexpected ex post costs (cost overruns).

Keywords: agency theory; information externality; sequential investment; bundling. (search for similar items in EconPapers)
JEL-codes: C61 D86 H11 H57 L33 (search for similar items in EconPapers)
Pages: 30 pages
Date: 2014-02
New Economics Papers: this item is included in nep-cta, nep-mic, nep-ppm and nep-pub
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Citations: View citations in EconPapers (1)

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Persistent link: https://EconPapers.repec.org/RePEc:pad:wpaper:0176

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