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La funzione economica del contratto di servizio nella trasformazione in spa delle aziende di servizi pubblici locali
[The economic function of the contract for local utilities]

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  • Termini, Valeria
  • Cella, Michela

Abstract

This paper raises a neglecteed point in the literature on local public services, showing that even "formal privatizaion" (the transformation of the service provider into a joint-stock company) has a significant influence on the agents involved. The relationship between local government and the firm is examined in different scenarios using the formal tools of contract theory. The article shows how the service contract, introduced after formal privatization, changes the incentives and the productive efficiency of the firm. This contract is a flexible instrument which permits optimal tradeoffs between conflicting objectives: the local government's interest in maximizing revenues and the quality of local services in the short run and the profit maximization objective of the more independent and market oriented firm. The paper also provides a historical and normative overview of the evolution of local public utilities, which offers empirical support for the theoretical results.

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File URL: http://mpra.ub.uni-muenchen.de/22486/
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Bibliographic Info

Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 22486.

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Date of creation: Dec 1999
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Handle: RePEc:pra:mprapa:22486

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Related research

Keywords: contract theory; local utilities; privatization of public service utilities;

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  1. Schmidt, Klaus M., 1996. "The costs and benefits of privatization: An incomplete contracts approach," Munich Reprints in Economics, University of Munich, Department of Economics 19773, University of Munich, Department of Economics.
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