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Delegation of Contracting in the Private Provision of Public Services

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  • Elisabetta Iossa

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Abstract

We use an incomplete-contract approach to compare contracting out by a public sector agency with the delegation of contracting out to a public-private partnership (PPP) that is a joint venture between private and sector agents. The PPP maximizes a linear combination of profit and social benefit. Such delegation may be desirable to curb innovations that reduce the cost of provision but also reduce social benefit. Delegation may be undesirable for innovations that increase social benefit but also raise costs. Our results are explained in terms of the shadow cost of public funds and the negotiating stance of the PPP.

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File URL: http://www.bris.ac.uk/Depts/CMPO/workingpapers/wp125.pdf
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Bibliographic Info

Paper provided by Department of Economics, University of Bristol, UK in its series The Centre for Market and Public Organisation with number 05/125.

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Length: 22 pages
Date of creation: Apr 2005
Date of revision:
Handle: RePEc:bri:cmpowp:05/125

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Keywords: delegation; Private Finance Initiative; Public Private Partnership; Public Service Provision;

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  1. Guasch, J. Luis & Laffont, Jean-Jacques & Straub, Stephane, 2003. "Renegotiation of concession contracts in Latin America," Policy Research Working Paper Series 3011, The World Bank.
  2. J. Luis Guasch & Jean-Jacques Laffont & Stéphane Straub, 2007. "Concessions of infrastructure in Latin America: Government-led renegotiation," Journal of Applied Econometrics, John Wiley & Sons, Ltd., John Wiley & Sons, Ltd., vol. 22(7), pages 1267-1294.
  3. John Bennett & Elisabetta Iossa, 2004. "Building and Managing Facilities for Public Services," Public Policy Discussion Papers, Economics and Finance Section, School of Social Sciences, Brunel University 02-08, Economics and Finance Section, School of Social Sciences, Brunel University.
  4. Oliver Hart, 2003. "Incomplete Contracts and Public Ownership: Remarks, and an Application to Public-Private Partnerships," Economic Journal, Royal Economic Society, Royal Economic Society, vol. 113(486), pages C69-C76, March.
  5. Helmut Bester & J?sef S?ovics, . "Delegated Bargaining And Renegotiation," UFAE and IAE Working Papers, Unitat de Fonaments de l'Anàlisi Econòmica (UAB) and Institut d'Anàlisi Econòmica (CSIC) 440.99, Unitat de Fonaments de l'Anàlisi Econòmica (UAB) and Institut d'Anàlisi Econòmica (CSIC).
  6. Besley, Timothy J. & Ghatak, Maitreesh, 2001. "Government versus Private Ownership of Public Goods," CEPR Discussion Papers, C.E.P.R. Discussion Papers 2725, C.E.P.R. Discussion Papers.
  7. Oliver Hart & Andrei Shleifer & Robert Vishny, 1996. "The Proper Scope of Government: Theory and an Application to Prisons," Harvard Institute of Economic Research Working Papers 1778, Harvard - Institute of Economic Research.
  8. Chaim Fershtman & Kenneth L. Judd & Ehud Kalai, 1990. "Observable Contracts: Strategic Delegation and Cooperation," Discussion Papers, Northwestern University, Center for Mathematical Studies in Economics and Management Science 879, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
  9. Clive Harris, 2003. "Private Participation in Infrastructure in Developing Countries : Trends, Impacts, and Policy Lessons," World Bank Publications, The World Bank, number 15124, August.
  10. Bos, Dieter & De Fraja, Gianni, 2002. "Quality and outside capacity in the provision of health services," Journal of Public Economics, Elsevier, Elsevier, vol. 84(2), pages 199-218, May.
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  12. Patrick W. Schmitz, 2000. "Partial Privatization and Incomplete Contracts: The Proper Scope of Government Reconsidered," FinanzArchiv: Public Finance Analysis, Mohr Siebeck, Tübingen, Mohr Siebeck, Tübingen, vol. 57(4), pages 394-411, August.
  13. Eshien Chong & Freddy Huet & Stéphane Saussier & Faye Steiner, 2006. "Public-Private Partnerships and Prices: Evidence from Water Distribution in France," Review of Industrial Organization, Springer, Springer, vol. 29(1), pages 149-169, September.
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Cited by:
  1. Arshad Ali Javed & Patrick T.I. Lam & Albert P.C. Chan, 2014. "Change negotiation in public-private partnership projects through output specifications: an experimental approach based on game theory," Construction Management and Economics, Taylor & Francis Journals, Taylor & Francis Journals, vol. 32(4), pages 323-348, April.
  2. Alberto Nucciarelli & Bert M. Sadowski & Paola O. Achard, 2010. "Emerging models of public-private interplay for European broadband access: Evidence from the Netherlands and Italy," Eindhoven Center for Innovation Studies (ECIS) working paper series, Eindhoven Center for Innovation Studies (ECIS) 10-03, Eindhoven Center for Innovation Studies (ECIS), revised May 2010.
  3. 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.
  4. Elisabetta Iossa & David Martimort, 2008. "The Simple Micro-Economics of Public-Private Partnerships," The Centre for Market and Public Organisation, Department of Economics, University of Bristol, UK 08/199, Department of Economics, University of Bristol, UK.
  5. Hoppe, Eva I & Kusterer, David J & Schmitz, Patrick W, 2010. "Public-private partnerships versus traditional procurement: An experimental investigation," CEPR Discussion Papers, C.E.P.R. Discussion Papers 8167, C.E.P.R. Discussion Papers.
  6. Hoppe, Eva I. & Schmitz, Patrick W., 2010. "Public versus private ownership: Quantity contracts and the allocation of investment tasks," Journal of Public Economics, Elsevier, Elsevier, vol. 94(3-4), pages 258-268, April.
  7. Athena Roumboutsos & Stéphane Saussier, 2014. "Public-private partnerships and investments in innovation: the influence of the contractual arrangement," Construction Management and Economics, Taylor & Francis Journals, Taylor & Francis Journals, vol. 32(4), pages 349-361, April.

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