Government Outsourcing: Public Contracting with Private Monopoly
University of Toulouse I - Advanced Research in Quantitative Applied Development Economics (ARQADE); CESifo (Center for Economic Studies and Ifo Institute for Economic Research)
Pierre M. Picard
Centre de Recherche en Économie Appliquée (CREA); Universite du Luxembourg
CESifo Working Paper Series No. 1733
The paper studies the impact of government budget constraint in a pure adverse selection problem of monopoly regulation. The government maximizes total surplus but incurs some cost of public funds. An alternative to regulation is proposed in which firms are free to enter the market and to choose their price and output levels. However the government can contract ex-post with the private firms. This ex-post contracting set-up allows more flexibility than traditional regulation where government commits to both investment and operation cash-flows. This is especially relevant in case of high technological uncertainties.
Number of Pages in PDF File: 42
Keywords: privatization, soft-budget constraint, adverse selection, regulation, natural monopoly
JEL Classification: L43, L51, D82, L33working papers series
Date posted: June 13, 2006
© 2013 Social Science Electronic Publishing, Inc. All Rights Reserved.
This page was processed by apollo7 in 0.625 seconds