A model of public and private partnership through concession contracts
AbstractIn this paper, we investigate the economics of concession under dynamic uncertainty using real option theory. We analyze the properties of concession as an instrument to privatize investment and management of public resources. In this context, we explore, in particular, three issues: (1) the conditions under which the contract is acceptable to both a public and a private party, (2) the conditions under which it is efficient, i.e. it is preferable to direct development and operation by the public sector, and (3) two different possible equilibrium solutions. Finally, we apply the theoretical results obtained to the case of a major public highway concessionaire in Italy.
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Bibliographic InfoPaper provided by ISTAT - Italian National Institute of Statistics - (Rome, ITALY) in its series ISAE Working Papers with number 104.
Length: 36 pages
Date of creation: Jul 2008
Date of revision:
concession contract; real option; license; Autostrade per l’Italia; private and public partnership;
Find related papers by JEL classification:
- D45 - Microeconomics - - Market Structure and Pricing - - - Rationing; Licensing
- H44 - Public Economics - - Publicly Provided Goods - - - Publicly Provided Goods: Mixed Markets
- H54 - Public Economics - - National Government Expenditures and Related Policies - - - Infrastructures
This paper has been announced in the following NEP Reports:
- NEP-ALL-2008-08-06 (All new papers)
- NEP-PBE-2008-08-06 (Public Economics)
- NEP-PUB-2008-08-06 (Public Finance)
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