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Optimal Provision of Infrastructure using Public-Private Partnership Contracts

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  • Gerard van der Laan

    ()
    (Vrije Universiteit Amsterdam)

  • Pieter Ruys
  • Dolf Talman

    (Tilburg University)

Abstract

This paper deals with the optimal provision of infrastructure by means of public-private partnership contracts. Inthe economic literature infrastructure is characterized as a large, indivisible and non-rival capital good thatproduces services for its users. The non-rivalness or nonexcludability of the infrastructure and the large costs ofinfrastructure causes it to be a public good. On the other hand, infrastructure possesses characteristics of a privatecommodity because it facilitates of the use of a complementary private commodity. Modern monitoring techniquesopen new possibilities to reveal the need of individual users for infrastructure. Consequently, a large part of thepublic financing of infrastructure can be privatised. In this paper we discuss the design of an operational system tofinance the costs of infrastructure. It will be shown that the system basically can result in an economically efficientlevel of infrastructure. The basic idea is that use of infrastructure is constrained by the availability of theinfrastructure being provided. Therefore users who are hampered by too small a provision of the infrastructure arewilling to pay for the use of infrastructure.

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Bibliographic Info

Paper provided by Tinbergen Institute in its series Tinbergen Institute Discussion Papers with number 01-011/1.

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Date of creation: 26 Jan 2001
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Handle: RePEc:dgr:uvatin:20010011

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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. Cornet, Bernard, 1988. "General equilibrium theory and increasing returns : Presentation," Journal of Mathematical Economics, Elsevier, vol. 17(2-3), pages 103-118, April.
  3. 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.
  4. 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.
  5. Ebert, Udo, 1997. "Selecting Preferences for Nonmarket Goods: Possibilities and Limitations," Public Finance = Finances publiques, , vol. 52(3-4), pages 301-17.
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  9. Bryan Ellickson & Birgit Grodal & Suzanne Scotchmer & William R. Zame, 1999. "Clubs and the Market," Econometrica, Econometric Society, vol. 67(5), pages 1185-1218, September.
  10. Cornielje, O. J. C. & Van Der Laan, G., 1986. "The computation of quantity-constrained equilibria by virtual taxes," Economics Letters, Elsevier, vol. 22(1), pages 1-6.
  11. 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.
  12. Cornes,Richard & Sandler,Todd, 1996. "The Theory of Externalities, Public Goods, and Club Goods," Cambridge Books, Cambridge University Press, number 9780521477185, April.
  13. Vohra, Rajiv, 1990. "On the Inefficiency of Two-Part Tariffs," Review of Economic Studies, Wiley Blackwell, vol. 57(3), pages 415-38, July.
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