Optimal Ownership of Public Goods Reconsidered

19 Pages Posted: 25 Sep 2014

See all articles by Patrick W. Schmitz

Patrick W. Schmitz

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

Multiple version iconThere are 2 versions of this paper

Date Written: August 2014

Abstract

Consider a non-governmental organization (NGO) that can invest in a public good. Should the government or the NGO own the public project? In an incomplete contracting framework with split-the-difference bargaining, Besley and Ghatak (2001) argue that the party who values the public good most should be the owner. We demonstrate the robustness of their insight when the split-the-difference rule is replaced by the deal-me-out solution. Our finding is in contrast to the private good results of Chiu (1998) and De Meza and Lockwood (1998), who show that the optimal ownership structure crucially depends on whether the split-the-difference rule or the deal-me-out solution is used.

Keywords: bargaining, incomplete contracts, investment incentives, ownership, public goods

JEL Classification: C78, D23, D86, H41, L31

Suggested Citation

Schmitz, Patrick W., Optimal Ownership of Public Goods Reconsidered (August 2014). CEPR Discussion Paper No. DP10110. Available at SSRN: https://ssrn.com/abstract=2501582

Patrick W. Schmitz (Contact Author)

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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