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Public versus private ownership: Quantity contracts and the allocation of investment tasks

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  • Hoppe, Eva I.
  • Schmitz, Patrick W.

Abstract

The government wants a certain good or service to be provided. Should the required assets be publicly or privately owned or should a partnership be formed? Building on the incomplete contracting approach, we argue that the initially specified quantity of an ex ante describable basic good can have important effects on investment incentives, which has been neglected in the literature so far. We also study how the tasks of investing in quality improvements and cost reductions should be assigned. We show how the optimal contracts and governance structures depend on the exogenous parameters of the model such as the nature of the investments and the parties' bargaining powers.

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Bibliographic Info

Article provided by Elsevier in its journal Journal of Public Economics.

Volume (Year): 94 (2010)
Issue (Month): 3-4 (April)
Pages: 258-268

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Handle: RePEc:eee:pubeco:v:94:y:2010:i:3-4:p:258-268

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Web page: http://www.elsevier.com/locate/inca/505578

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Keywords: Incomplete contracts Contractible control Privatization;

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References

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Citations

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Cited by:
  1. Schmitz, Patrick W., 2013. "Bargaining position, bargaining power, and the property rights approach," Economics Letters, Elsevier, vol. 119(1), pages 28-31.
  2. Schmitz, Patrick W, 2013. "Public Procurement in Times of Crisis: The Bundling Decision Reconsidered," CEPR Discussion Papers 9676, C.E.P.R. Discussion Papers.
  3. Schmitz, Patrick W., 2012. "Incomplete contracts and optimal ownership of public goods," MPRA Paper 41730, University Library of Munich, Germany.
  4. Eva I. Hoppe & David J. Kusterer & Patrick W. Schmitz, 2011. "Public-private partnerships versus traditional procurement: An experimental investigation," Cologne Graduate School Working Paper Series 02-02, Cologne Graduate School in Management, Economics and Social Sciences.
  5. Chen, Bin R. & Chiu, Y. Stephen, 2010. "Public-private partnerships: Task interdependence and contractibility," International Journal of Industrial Organization, Elsevier, vol. 28(6), pages 591-603, November.
  6. Halonen-Akatwijuka, Maija, 2012. "Nature of human capital, technology and ownership of public goods," Journal of Public Economics, Elsevier, vol. 96(11), pages 939-945.
  7. Schmitz, Patrick W, 2001. "The Hold-up Problem and Incomplete Contracts: A Survey of Recent Topics in Contract Theory," Bulletin of Economic Research, Wiley Blackwell, vol. 53(1), pages 1-17, January.
  8. Lisa Grazzini & Alessandro Petretto, 2013. "Health and Education: Challenges and Financial Constraints," Working Papers - Economics wp2013_19.rdf, Universita' degli Studi di Firenze, Dipartimento di Scienze per l'Economia e l'Impresa.
  9. Schmitz, Patrick W., 2010. "Contractual solutions to hold-up problems with quality uncertainty and unobservable investments," Journal of Mathematical Economics, Elsevier, vol. 46(5), pages 807-816, September.
  10. Hoppe, Eva I. & Schmitz, Patrick W., 2012. "Public-private partnerships versus traditional procurement: Innovation incentives and information gathering," MPRA Paper 41966, University Library of Munich, Germany.
  11. Schmitz, Patrick W., 2010. "On contractual solutions to hold-up problems with quality uncertainty and unobservable investments," MPRA Paper 23157, University Library of Munich, Germany.
  12. Cambini Carlo & Filippini Massimo & Piacenza Massimiliano & Vannoni Davide, 2011. "Corporatization and Firm Performance: Evidence from Publicly-Provided Local Utilities," Review of Law & Economics, De Gruyter, vol. 7(1), pages 191-213, July.

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