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Opportunism and Third-Party Influence on Long-Term Public Contracts

Gonzalo Ruiz D.
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Gonzalo Ruiz D.: Departamento de Economía de la Pontificia Universidad Católica del Perú

No 2018-456, Documentos de Trabajo / Working Papers from Departamento de Economía - Pontificia Universidad Católica del Perú

Abstract: The present paper refers to the influence of interest groups and stakeholders on government and concessionaire contractual behavior in long-term public contracts. In particular, we show how government political commitments with interest groups represent a ‘reputational investment’, which reduces the incentives to enforce the contract and increases the willingness to accept renegotiation proposals. This situation, particularly in the case of “high profile” or “politically sensitive” projects, when observed by the private concessionaire, can be exploited to capture additional quasi-rents from the exchange relationship. Using a simple model and a case study of the South Interoceanic Road Project in Peru, we show how interactions of the government with influential stakeholders, in the context of weak institutions, can create favorable conditions for private opportunistic behavior. JEL Classification-JEL: D72 , L14 , L33 , L51

Keywords: Concession; Opportunism; Stakeholder (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-cdm, nep-cta, nep-ppm and nep-ure
Date: 2018
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