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Risk Sharing in Public-Private Partnerships

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  • Ronit Mukherji

    (Ashoka University)

Abstract

Public-private partnerships (PPPs) have been widely used to finance many projects. Despite the growing importance of PPPs, a serious attempt has not been made to come up with a unified theory which can understand the different incentive mechanisms, risks, and heterogeneity embedded in a PPP structure which can often lead to their failure. Using a global games framework, this paper achieves to do exactly that by elaborating upon the role of coordination and uncertainty in these projects. With heterogeneous information, the incidence of failure can be uniquely identified by characterizing and defining the equilibrium. Comparative static results point to how policymakers can improve the probability of success in these partnerships. The incentive mechanisms also highlight how a PPP structure can do better than other forms of investment organization.

Suggested Citation

  • Ronit Mukherji, 2023. "Risk Sharing in Public-Private Partnerships," SN Operations Research Forum, Springer, vol. 4(4), pages 1-17, December.
    • Handle: RePEc:spr:snopef:v:4:y:2023:i:4:d:10.1007_s43069-023-00254-z
    DOI: 10.1007/s43069-023-00254-z
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