Overcoming Opportunism in Public-Private Project Finance

Marian Moszoro

MPRA Paper from University Library of Munich, Germany

Abstract: Opportunism, either governmental or private, is a powerful deterrent against public-private project financing, especially when considering the scale of the investment in infrastructure. The parties can, however, secure themselves against opportunism of the counter-party by exchanging an exit (put) option for the private investor and a bail-out (call) option for the public agent on the private investor’s shares. These over-the-counter options combine the stability of long-term contracts and the flexibility of short-term contracts. The exit/bail-out option mechanism reduces entry barriers by streamlining incomplete long-term contracts and avoiding contractual problems related to bounded rationality and opportunism.

Keywords: Noncooperative Games; Opportunism; Exit and Bail-out Options; Public-Private Partnerships; Contestable Markets (search for similar items in EconPapers)
JEL-codes: C72 D23 L32 (search for similar items in EconPapers)
Date: 2013-03
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Citations: View citations in EconPapers (2)

Published in Journal of Applied Corporate Finance 1.25(2013): pp. 89-96

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Journal Article: Overcoming Opportunism in Public-Private Project Finance (2013)
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