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Public-private partnerships versus traditional procurement: Innovation incentives and information gathering

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  • Hoppe, Eva I
  • Schmitz, Patrick W

Abstract

A government agency wants a facility to be built and managed to provide a public service. Two different modes of provision are considered. In a public-private partnership, the tasks of building and managing are bundled, while under traditional procurement, these tasks are delegated to separate private contractors. The two modes differ in their incentives to innovate and to gather private information about future costs to adapt the service provision to changing circumstances. Depending on the potential benefits of such adaptations, the government agency's preferred mode of provision may be different from the one that should be chosen from a welfare perspective.

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Paper provided by C.E.P.R. Discussion Papers in its series CEPR Discussion Papers with number 7681.

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Date of creation: Feb 2010
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Handle: RePEc:cpr:ceprdp:7681

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Keywords: Incomplete contracts; Information gathering; Integration versus separation; Public-private partnerships;

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References

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Citations

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Cited by:
  1. Warwick McKibbin & Timo Henckel, 2010. "The Economics of Infrastructure in a Globalized World: Issues, Lessons and Future Challenges," CAMA Working Papers 2010-39, Centre for Applied Macroeconomic Analysis, Crawford School of Public Policy, The Australian National University.
  2. 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.
  3. 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.
  4. Ph.D. Candidate Marina ZAHARIOAIE, 2011. "Analiza utilizarii parteneriatului public-privat in externalizarea activitatii administrative - The Analysis of the Use of Public-Private Partnership in Outsourcing Administrative work (Romanian versi," Logos Universalitate Mentalitate Educatie Noutate - Sectiunea Stiinte Economice si Administrative/ Logos Universality Mentality Education Novelty - Section: Economical and Administrative Sciences, Editura Lumen, Department of Economics, vol. 1, pages 197-206, February.
  5. Antonio García-Lorenzo, 2014. "Cooperación público-privada en la prestación de servicios públicos: el conflicto entre la flexibilidad y la incertidumbre," SERMED 2014 Conference Papers p08, Instituto Universitario de Análisis Económico y Social.
  6. Iossa, Elisabetta & Martimort, David, 2013. "Hidden Action or Hidden Information? How Information Gathering Shapes Contract Design," CEPR Discussion Papers 9552, C.E.P.R. Discussion Papers.
  7. Schmitz, Patrick W, 2013. "Public Procurement in Times of Crisis: The Bundling Decision Reconsidered," CEPR Discussion Papers 9676, C.E.P.R. Discussion Papers.
  8. Schmitz, Patrick W., 2012. "Job design with conflicting tasks reconsidered," MPRA Paper 36914, University Library of Munich, Germany.
  9. Schmitz, Patrick W., 2009. "Contractual solutions to hold-up problems with quality uncertainty and unobservable investments," CEPR Discussion Papers 7584, C.E.P.R. Discussion Papers.
  10. Schmitz, Patrick W, 2010. "Should a principal hire one agent or two agents to perform two sequential tasks?," CEPR Discussion Papers 7976, C.E.P.R. Discussion Papers.
  11. Takeshi Nishimura, 2012. "Bundling Decision in Procurement Auctions with Risk-Averse Suppliers," Global COE Hi-Stat Discussion Paper Series gd12-237, Institute of Economic Research, Hitotsubashi University.
  12. Mathias Erlei & Wiebke Roß, 2013. "Bounded Rationality as an Essential Ingredient of the Holdup Problem," TUC Working Papers in Economics 0009, Abteilung für Volkswirtschaftslehre, Technische Universität Clausthal (Department of Economics, Technical University Clausthal).

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