Public-Private Partnerships: Task Interdependence and Contractibility

Chen, Bin R.; Chiu, Y. Stephen

doi:10.2139/ssrn.1424324

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Public-Private Partnerships: Task Interdependence and Contractibility

38 Pages Posted: 30 Jun 2009

See all articles by Bin R. Chen

Bin R. Chen

Sun Yat-sen University (SYSU) - School of Business

Y. Stephen Chiu

The University of Hong Kong - School of Economics and Finance

Date Written: January 14, 2009

Abstract

We examine the proper scope of public-private partnerships in the context of a project consisting of two tasks, building and operation of a facility. We investigate the optimal arrangement regarding bundling versus unbundling and private ownership versus public ownership. Like Bennett and Iossa (2006), we assume that the innovative activity in the building stage has impacts on, among other things, the subsequent operation cost; the novelty is that we consider a more kind of task interdependence. Another novelty is that we allow the innovative activity in the second, operation stage to become contractible once the innocative activity in the building stage is undertaken.

Keywords: Complementarity, Substitutability, Incomplete contracts, Public-private partnership

JEL Classification: D23, H11, L33

Suggested Citation: Suggested Citation

Chen, Bin R. and Chiu, Yiu Wah Stephen, Public-Private Partnerships: Task Interdependence and Contractibility (January 14, 2009). Available at SSRN: https://ssrn.com/abstract=1424324 or http://dx.doi.org/10.2139/ssrn.1424324