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Optimal Provision of Infrastructure Using Public-Private Partnership Contracts

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  • Laan, G. van der
  • Ruys, P.H.M.
  • Talman, A.J.J.

    (Tilburg University, Center for Economic Research)

Abstract

This paper deals with the optimal provision of infrastructure by means of public-private partnership contracts.In the economic literature infrastructure is characterized as a large, indivisible and non-rival capital good that produces services for its users.Users can be both consumers and producers. Consumers may derive utility from infrastructure, either indirectly, because it facilitates the use of some particular private good, or directly, because it is available for this facility.Examples are roads that facilitate the use of private cars, or computer systems facilitating the use of personal computers. Producers may use infrastructure as one of their production factors.The non-rivalness or nonexcludability of the infrastructure and the large costs to produce and maintain the infrastructure causes it to be a public good.On the other hand, infrastructure also possesses characteristics of a private commodity because it facilitates of the use of a complementary private commodity.Modern information-technological developments open new possibilities to eveal the need of individual users for a specific public infrastructure, by monitoring the private use they make of it.Consequently, a large part of the public financing of infrastructure can be privatised.That forms the base for public private partnerships to establish and maintain infrastructure.In this paper we discuss the design of an operational system to finance the costs of infrastructure.It will be shown that the system basically can result in an economically efficient level of infrastructure.The basic idea is that use of infrastructure is constrained by the availability of the infrastructure being provided.Therefore users who are hampered by too small a provision of the infrastructure are willing to pay for the use of infrastructure.

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Bibliographic Info

Paper provided by Tilburg University, Center for Economic Research in its series Discussion Paper with number 2000-126.

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Date of creation: 2000
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Handle: RePEc:dgr:kubcen:2000126

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  1. Ruys, P.H.M. & Laan, G. van der, 1987. "Computation of an industrial equilibrium," Serie Research Memoranda 0026, VU University Amsterdam, Faculty of Economics, Business Administration and Econometrics.
  2. Hammond, Peter J & Villar, Antonio, 1998. " Efficiency with Non-convexities: Extending the "Scandinavian Consensus" Approaches," Scandinavian Journal of Economics, Wiley Blackwell, vol. 100(1), pages 11-32, March.
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  7. Mas-Colell, Andreu, 1980. "Efficiency and Decentralization in the Pure Theory of Public Goods," The Quarterly Journal of Economics, MIT Press, vol. 94(4), pages 625-41, June.
  8. Bryan Ellickson & Birgit Grodal & Suzanne Scotchmer & William R. Zame, 1999. "Clubs and the Market," Discussion Papers 99-04, University of Copenhagen. Department of Economics.
    • Bryan Ellickson & Birgit Grodal & Suzanne Scotchmer & William R. Zame, 1999. "Clubs and the Market," Econometrica, Econometric Society, vol. 67(5), pages 1185-1218, September.
  9. Neary, J.P & Roberts, K.W.S, 1978. "The Theory of Household Behaviour under Rationing," The Warwick Economics Research Paper Series (TWERPS) 132, University of Warwick, Department of Economics.
  10. Diamantaras, Dimitrios & Gilles, Robert P, 1996. "The Pure Theory of Public Goods: Efficiency, Dencentralization, and the Core," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 37(4), pages 851-60, November.
  11. Cornet, Bernard, 1988. "General equilibrium theory and increasing returns : Presentation," Journal of Mathematical Economics, Elsevier, vol. 17(2-3), pages 103-118, April.
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