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How (Not) to Foster Innovations in Public Infrastructure Projects

Eva Hoppe and Patrick Schmitz

MPRA Paper from University Library of Munich, Germany

Abstract: The government wants an infrastructure-based public service to be provided. First, the infrastructure has to be built; subsequently, it has to be operated. Should the government bundle the building and operating tasks in a public-private partnership? Or should it choose traditional procurement, i.e. delegate the tasks to different firms? Each task entails unobservable investments to come up with innovations. It turns out that depending on the nature of the innovations, bundling may either stimulate or discourage investments. Moreover, we find that if renegotiation cannot be prevented, public-private partnerships may lead the government to deliberately opt for technologically inferior projects.

Keywords: Contract theory; procurement; public-private partnerships; moral hazard; renegotiation (search for similar items in EconPapers)
JEL-codes: D86 H11 H54 H57 L33 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-mic, nep-pbe and nep-ppm
Date: 2019
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Working Paper: How (Not) to Foster Innovations in Public Infrastructure Projects (2018) Downloads
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