Public-Private Partnerships versus Traditional Procurement: Innovation Incentives and Information Gathering

32 Pages Posted: 10 Feb 2010

See all articles by Eva I. Hoppe

Eva I. Hoppe

University of Cologne - Department of Economics

Patrick W. Schmitz

University of Cologne; Centre for Economic Policy Research (CEPR)

Multiple version iconThere are 2 versions of this paper

Date Written: February 2010

Abstract

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, while under traditional procurement, these tasks are delegated to separate private contractors. The two modes differ in their incentives to innovate and to gather private information about future costs to adapt the service provision to changing circumstances. Depending on the potential benefits of such adaptations, the government agency's preferred mode of provision may be different from the one that should be chosen from a welfare perspective.

Keywords: Incomplete contracts, Information gathering, Integration versus separation, Public-private partnerships

JEL Classification: D86, H11, L33

Suggested Citation

Hoppe, Eva I. and Schmitz, Patrick W., Public-Private Partnerships versus Traditional Procurement: Innovation Incentives and Information Gathering (February 2010). CEPR Discussion Paper No. DP7681. Available at SSRN: https://ssrn.com/abstract=1550593

Eva I. Hoppe (Contact Author)

University of Cologne - Department of Economics ( email )

Cologne, 50923
Germany

Patrick W. Schmitz

University of Cologne ( email )

Albertus-Magnus-Platz
Cologne, 50923
Germany

HOME PAGE: http://schmitz.uni-koeln.de/index.php?s=mitarbeiter&t=schmitz

Centre for Economic Policy Research (CEPR)

London
United Kingdom

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