Regulation Costs and Private-Sector Know-How Spillovers of Public-Private Partnerships
21 Pages Posted: 27 Apr 2018 Last revised: 4 Jun 2018
Date Written: December 15, 2017
The paper presents comparative statics of organizational modes of natural monopoly in public utilities with a focus on co-ownership and co-governance. Private monopoly lowers output and increases price to maximize profit; public monopoly incurs higher costs due to the lack of know-how; and a regulated monopoly results in regulation costs to overcome informational asymmetries. A public-private partnership arises as an efficient organization mode when it enables the internalization of private know-how and saves regulation costs due to correspondingly sufficient private and public residual and control rights. Public-private monopoly supports higher prices than marginal costs due to rent sharing, with its upper price frontier decreasing in private residual rights.
Keywords: fiscal policy, benefit-cost analysis, stabilization policy, cost of government
JEL Classification: L22, L32, L43, L51
Suggested Citation: Suggested Citation