Public-Private Partnerships Versus Traditional Procurement: Innovation Incentives and Information Gathering
Eva I. Hoppe
University of Cologne - Department of Economics
Patrick W. Schmitz
University of Cologne; Centre for Economic Policy Research (CEPR)
October 15, 2012
A government agency wants a facility to be built and managed to provide a public service. Two different modes of provision are considered. In a public-private partnership, the tasks of building and managing are bundled, whereas under traditional procurement, these tasks are delegated to separate private contractors. The two provision modes differ in their incentives to innovate and to gather private information about future costs to adapt the service provision to changing circumstances. The government agency's preferred mode of provision depends on the information gathering costs, the costs of innovation efforts, and on the degree to which effort is contractible.
Number of Pages in PDF File: 31
Keywords: Public-Private Partnerships, Integration Versus Separation, Information Gathering, Incomplete Contracts
JEL Classification: D86, L33, H11working papers series
Date posted: February 28, 2010 ; Last revised: October 15, 2012
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