Competition for Local Public Services with Learning-by-doing and Transferability
AbstractMany local governments allow competition between public and private rms for provision of local public services in order to reduce procurement cost. Competition is usually introduced through competitive tendering for concession contracts. We show that in a symmetric competition between public and private rms with learning-by-doing, private rm's ability to transfer learning among concessions may reduce consumer's welfare. The model provides testable implications which are consistent with the empirical evidence: little competition for concessions, retail prices higher under private operation than under public one, and subsidies and retail prices to service providers increased over time. In addition, consumers' gains from switching to private ownership are higher in industries where private rms have low-ability to transfer learning among di erent concessions.
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Bibliographic InfoPaper provided by Universidade de São Paulo, Faculdade de Economia, Administração e Contabilidade de Ribeirão Preto in its series Working Papers with number 06-2011.
Date of creation: Feb 2011
Date of revision:
Sequential Auction; Public versus Private Firms; Learning-by-doing; Transferability of Learning;
Find related papers by JEL classification:
- D44 - Microeconomics - - Market Structure and Pricing - - - Auctions
- H57 - Public Economics - - National Government Expenditures and Related Policies - - - Procurement
- H70 - Public Economics - - State and Local Government; Intergovernmental Relations - - - General
- H87 - Public Economics - - Miscellaneous Issues - - - International Fiscal Issues; International Public Goods
This paper has been announced in the following NEP Reports:
- NEP-ALL-2011-09-22 (All new papers)
- NEP-COM-2011-09-22 (Industrial Competition)
- NEP-CTA-2011-09-22 (Contract Theory & Applications)
- NEP-PBE-2011-09-22 (Public Economics)
- NEP-URE-2011-09-22 (Urban & Real Estate Economics)
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