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http://ssrn.com/abstract=1271082
 
 

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The Simple Micro-Economics of Public-Private Partnerships


Elisabetta Iossa


University of Rome Tor Vergata ; University of Bristol - Leverhulme Centre for Market and Public Organisation (CMPO)

David Martimort


University of Toulouse 1 - Industrial Economic Institute (IDEI); CESifo (Center for Economic Studies and Ifo Institute)

December 1, 2008

CEIS Working Paper No. 139

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 fi rm chooses non-contractible e fforts in cost reduction and quality improvement. We fi rst consider the eff ect on incentives and risk transfer of bundling building and management stages into a single contract, allowing for di fferent 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 fi nanciers and the impact of private fi nance. We discuss the trade-off between incentive and flexibility in PPP agreements and the dynamics of PPPs, including cost overruns. We also consider how institutions, and specifi cally the risk of regulatory opportunism, aff ects contract design and incentives. The conclusion summarizes policy implications on the desirability of PPPs.

Number of Pages in PDF File: 39

Keywords: Public-private partnerships, public-service provision

JEL Classification: D8, L5, H54, H57

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Date posted: September 20, 2008 ; Last revised: February 25, 2014

Suggested Citation

Iossa, Elisabetta and Martimort, David, The Simple Micro-Economics of Public-Private Partnerships (December 1, 2008). CEIS Working Paper No. 139. Available at SSRN: http://ssrn.com/abstract=1271082 or http://dx.doi.org/10.2139/ssrn.1271082

Contact Information

Elisabetta Iossa (Contact Author)
University of Rome Tor Vergata ( email )
Via Columbia n.2
Rome, 00133
Italy
University of Bristol - Leverhulme Centre for Market and Public Organisation (CMPO) ( email )
12 Priory Road
Bristol BS8 1TN
United Kingdom
David Martimort
University of Toulouse 1 - Industrial Economic Institute (IDEI) ( email )
Manufacture des Tabacs
21 Allee de Brienne bat. F
Toulouse Cedex, F-31000
France
+33 5 6112 8614 (Phone)
+33 5 6112 8637 (Fax)
CESifo (Center for Economic Studies and Ifo Institute)
Poschinger Str. 5
Munich, DE-81679
Germany
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