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A model of public and private partnership through concession contracts

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Author Info

  • Pasquale L. Scandizzo

    (University of Rome Tor Vergata)

  • Marco Ventura

    (ISAE - Institute for Studies and Economic Analyses)

Abstract

In 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 Info

Paper provided by ISTAT - Italian National Institute of Statistics - (Rome, ITALY) in its series ISAE Working Papers with number 104.

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Length: 36 pages
Date of creation: Jul 2008
Date of revision:
Handle: RePEc:isa:wpaper:104

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Related research

Keywords: concession contract; real option; license; Autostrade per l’Italia; private and public partnership;

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References

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  1. Paul Klemperer, 2001. "How (Not) to Run Auctions: The European 3G Telecom Auctions," Economics Series Working Papers 2002-W05, University of Oxford, Department of Economics.
  2. Paul Klemperer & Ken Binmore, 2001. "The Biggest Auction Ever: the Sale of the British 3G Telecom Licences," Economics Series Working Papers 2002-W04, University of Oxford, Department of Economics.
  3. Michele Moretto & Chiara D.Alpaos & Cesare Dosi, 2005. "Concession Length and Investment Timing Flexibility," Working Papers 2005.32, Fondazione Eni Enrico Mattei.
  4. Professor Paul Klemperer, 2000. "What Really Matters in Auction Design," Microeconomics 0004008, EconWPA.
  5. Octavio A. F. Tourinho., 1979. "The Option Value of Reserves of Natural Resources," Research Program in Finance Working Papers 94, University of California at Berkeley.
  6. Klein, Michael, 1998. "Bidding for concessions," Policy Research Working Paper Series 1957, The World Bank.
  7. Scandizzo, Pasquale L. & Ventura, Marco, 0. "Bids for the UMTS system: An empirical evaluation of the Italian case," Telecommunications Policy, Elsevier, vol. 30(10-11), pages 533-551, November.
  8. Andrea Prat & Tommaso M. Valletti, 2001. "Spectrum Auctious Versus Beauty Contests: Costs and Benefits," Rivista di Politica Economica, SIPI Spa, vol. 91(4), pages 65-114, April-May.
  9. van Damme, Eric, 2002. "The European UMTS-auctions," European Economic Review, Elsevier, vol. 46(4-5), pages 846-858, May.
  10. Urs Meister, 2004. "Franchise Bidding in the Water Industry- Auction Schemes and Investment Incentives," Working Papers 0033, University of Zurich, Institute for Strategy and Business Economics (ISU).
  11. Damme, E.E.C. van, 2002. "The European UMTS-auctions," Open Access publications from Tilburg University urn:nbn:nl:ui:12-89584, Tilburg University.
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