How to Design Infrastructure Contracts in a Warming World? A Critical Appraisal of Public-Private Partnerships
AbstractWe analyze how uncertainty regarding future climate conditions affects the design of concession contracts, organizational forms and technological choices in a principal-agent context with dynamic moral hazard, limited liability and irreversibility constraints. The prospect of future, uncertain productivity shocks on the returns on the firm’s effort creates an option value of delaying efforts which exacerbates agency costs. Contracts and organizational forms are drafted to control this cost of delegated flexibility. Our analysis is relevant for infrastructure sectors that are sensitive to changing weather conditions and sheds a pessimistic light on the relevance of Public-Private Partnerships in this context.
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Date of creation: 11 May 2012
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- Martimort, David & Straub, Stéphane, 2012. "How to Design Infrastructure Contracts in a Warming World? A Critical Appraisal of Public-Private Partnerships," TSE Working Papers 12-315, Toulouse School of Economics (TSE).
- D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design
- L32 - Industrial Organization - - Nonprofit Organizations and Public Enterprise - - - Public Enterprises; Public-Private Enterprises
- Q54 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Climate; Natural Disasters
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