Public-Private Partnerships Versus Traditional Procurement: An Experimental Investigation

48 Pages Posted: 18 Jan 2011

See all articles by Eva I. Hoppe

Eva I. Hoppe

University of Cologne - Department of Economics

David J. Kusterer

University of Cologne - Department of Economics

Patrick W. Schmitz

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

Date Written: December 2010

Abstract

A government agency wants an infrastructure-based public service to be provided. Our experimental study compares two different modes of provision. In a public-private partnership, the two tasks of building the infrastructure and operating it are delegated to one private contractor (a consortium), while under traditional procurement, these tasks are delegated to separate contractors. We find support for the theoretical prediction that, compared to traditional procurement, a public-private partnership provides stronger incentives to make cost-reducing investments (which may increase or decrease service quality). In two additional treatments, we study governance structures which explicitly take subcontracting within private consortia into account.

Keywords: experiment, incomplete contracts, procurement, public-private partnerships

JEL Classification: D86, H11, L33

Suggested Citation

Hoppe, Eva I. and Kusterer, David J. and Schmitz, Patrick W., Public-Private Partnerships Versus Traditional Procurement: An Experimental Investigation (December 2010). CEPR Discussion Paper No. DP8167. Available at SSRN: https://ssrn.com/abstract=1742692

Eva I. Hoppe (Contact Author)

University of Cologne - Department of Economics ( email )

Cologne, 50923
Germany

David J. Kusterer

University of Cologne - Department of Economics ( email )

Albertus-Magnus-Platz
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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