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Imperfect Bundling In Public-Private Partnerships

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  • Luciano Greco

    (University of Padova)

Abstract

The economic literature on PPPs has generally overlooked agency problems within private consortia. We provide a first contribution in this direction, relying on a simple incomplete contracts framework where a Builder and an Operator set up a Special Purpose Vehicle (SPV) to carry out a contract with the government. Because of incomplete contracts, the bundling of tasks is imperfect, and the SPV ownership structure is the main tool to regulate the power of private incentives. The scope for welfare-improving PPPs reduces with respect to the case of perfect bundling, and the private negotiation always awards a suboptimal SPV-ownership share to the Builder. Thus, imposing ownership requirements in PPPs is a welfare-improving policy.

Suggested Citation

  • Luciano Greco, 2012. "Imperfect Bundling In Public-Private Partnerships," "Marco Fanno" Working Papers 0147, Dipartimento di Scienze Economiche "Marco Fanno".
    • Handle: RePEc:pad:wpaper:0147
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    Cited by:

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    2. Schmitz, Patrick W., 2017. "Incomplete contracts, shared ownership, and investment incentives," Journal of Economic Behavior & Organization, Elsevier, vol. 144(C), pages 153-165.
    3. Eva I. Hoppe & Patrick W. Schmitz, 2021. "How (Not) to Foster Innovations in Public Infrastructure Projects," Scandinavian Journal of Economics, Wiley Blackwell, vol. 123(1), pages 238-266, January.
    4. Deng, Zhongqi & Song, Shunfeng & Chen, Yongjun, 2016. "Private participation in infrastructure project and its impact on the project cost," China Economic Review, Elsevier, vol. 39(C), pages 63-76.
    5. Friese, Maria & Heimeshoff, Ulrich & Klein, Gordon J., 2020. "Property rights and transaction costs – The role of ownership and organization in German public service provision," International Journal of Industrial Organization, Elsevier, vol. 72(C).
    6. Tharun Dolla & Boeing Laishram, 2019. "Bundling in public–private partnership projects – a conceptual framework," International Journal of Productivity and Performance Management, Emerald Group Publishing Limited, vol. 69(6), pages 1177-1203, December.
    7. Kosuke Oshima, 2016. "Public-Private Partnerships, Dividing Operational Stage, and Optimal Governance Structures," Public Organization Review, Springer, vol. 16(4), pages 443-459, December.
    8. Marco Buso, 2014. "Public-Private Partnership: Information Externality in Sequential Investments," "Marco Fanno" Working Papers 0176, Dipartimento di Scienze Economiche "Marco Fanno".
    9. Elisa Villani & Luciano Greco & Nelson Phillips, 2017. "Understanding Value Creation in Public-Private Partnerships: A Comparative Case Study," Journal of Management Studies, Wiley Blackwell, vol. 54(6), pages 876-905, September.
    10. Mahavadi Dhanshyam & Samir K. Srivastava, 2021. "Governance structures for public infrastructure projects: Public–private management regimes, contractual forms and innovation," Construction Management and Economics, Taylor & Francis Journals, vol. 39(8), pages 652-668, August.
    11. Schmitz, Patrick W., 2023. "The proper scope of government reconsidered: Asymmetric information and incentive contracts," European Economic Review, Elsevier, vol. 157(C).
    12. Kusterer, David J. & Schmitz, Patrick W., 2020. "Public goods, property rights, and investment incentives: An experimental investigation," Journal of Economic Behavior & Organization, Elsevier, vol. 177(C), pages 514-532.
    13. Elisa Villani & Luciano Greco & Nelson Phillips, 2015. "Business Models and Institutional Complexity: Understanding Value Creation in Healthcare Sector Public-Private Partnerships," BEMPS - Bozen Economics & Management Paper Series BEMPS31, Faculty of Economics and Management at the Free University of Bozen.
    14. Marco Buso & Luciano Greco, 2021. "The Optimality of Public-Private Partnerships under Financial and Fiscal Constraints," "Marco Fanno" Working Papers 0276, Dipartimento di Scienze Economiche "Marco Fanno".

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    More about this item

    Keywords

    Incomplete contracts; Nash Bargaining; Ownership; Special-Purpose Vehicle.;
    All these keywords.

    JEL classification:

    • D86 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Economics of Contract Law
    • L33 - Industrial Organization - - Nonprofit Organizations and Public Enterprise - - - Comparison of Public and Private Enterprise and Nonprofit Institutions; Privatization; Contracting Out
    • H11 - Public Economics - - Structure and Scope of Government - - - Structure and Scope of Government
    • H57 - Public Economics - - National Government Expenditures and Related Policies - - - Procurement

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