The Simple Micro-Economics of Public-Private Partnerships

Elisabetta Iossa and David Martimort

No 139, CEIS Research Paper from Tor Vergata University, CEIS

Abstract: We build on the existing literature in Public Private Partnerships (PPP) to analyze the main incentive issues in PPPs and the shape of optimal contracts in those contexts. We present a basic model of procurement in a multi-task environment in which a risk averse firm chooses non-contractible efforts in cost reduction and quality improvement. We first consider the effect on incentives and risk transfer of bundling building and management stages into a single contract, allowing for different assumptions on feasible contracts and information available to the government. Then we extend the model in novel directions. We study the relationship between the operator and its financiers and the impact of private finance. We discuss the trade-off between incentive and exibility in PPP agreements and the dynamics of PPPs, including cost overruns. We also consider how institutions, and specifically the risk of regulatory opportunism, affects contract design and incentives. The conclusion summarizes policy implications on the desirability of PPPs

Keywords: Public-private partnerships; public-service provision (search for similar items in EconPapers)
JEL-codes: D8 H54 H57 L5 (search for similar items in EconPapers)
Pages: 39 pages
Date: 2008-12-19, Revised 2013-02-15
New Economics Papers: this item is included in nep-cta
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Citations: View citations in EconPapers (15)

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Related works:
Journal Article: The Simple Microeconomics of Public-Private Partnerships (2015)
Working Paper: The Simple Microeconomics of Public-Private Partnerships (2015)
Working Paper: The Simple Microeconomics of Public-Private Partnerships (2015)
Working Paper: The Simple Micro-Economics of Public-Private Partnerships (2008)
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