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A Theory of BOT Concession Contracts

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  • Auriol, Emmanuelle
  • Picard, Pierre

Abstract

In this paper, we discuss the choice for build-operate-and-transfer (BOT) concessions when governments and rm managers do not share the same information regarding the operation characteristics of a facility. We show that larger shadow costs of public funds and larger information asymmetries entice governments to choose BOT concessions. This result stems from a trade-o¤ between the government’s shadow costs of nancing the construction and the operation of the facility and the excessive usage price that the consumer may face during the concession period. The incentives to choose BOT concessions increase as a function of ex-ante informational asymmetries between governments and potential BOT concession holders and with the possibility of transferring the concession cost characteristics to public rms at the termination of the concession.

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Bibliographic Info

Paper provided by Toulouse School of Economics (TSE) in its series TSE Working Papers with number 11-228.

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Date of creation: 25 Mar 2011
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Publication status: Published in Journal of Economic Behavior and Organization, vol.�89, 2013, p.�187-209.
Handle: RePEc:tse:wpaper:24307

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Related research

Keywords: Public-private-partnership; privatization; adverse selection; regulation; natural monopoly; infrastructure; facilities;

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References

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  1. Auriol, Emmanuelle & Picard, Pierre M, 2006. "Government Outsourcing: Public Contracting with Private Monopoly," CEPR Discussion Papers 5643, C.E.P.R. Discussion Papers.
  2. Bennett, John & Iossa, Elisabetta, 2006. "Building and managing facilities for public services," Journal of Public Economics, Elsevier, vol. 90(10-11), pages 2143-2160, November.
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  23. Dewatripont, Mathias & Legros, Patrick, 2005. "Public-private partnerships: contract design and risk transfer," EIB Papers 5/2005, European Investment Bank, Economics Department.
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Citations

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Cited by:
  1. Gilles Edouard Espinosa & Caroline Hillairet & Benjamin Jourdain & Monique Pontier, 2013. "Reducing the debt : is it optimal to outsource an investment?," Working Papers hal-00824390, HAL.
  2. Gilles Edouard Espinosa & Caroline Hillairet & Benjamin Jourdain & Monique Pontier, 2013. "Reducing the debt : is it optimal to outsource an investment?," Papers 1305.4879, arXiv.org.
  3. Daniel Danau & Annalisa Vinella, 2012. "Public-private contracting under limited commitment," Economics Working Paper Archive (University of Rennes 1 & University of Caen) 201227, Center for Research in Economics and Management (CREM), University of Rennes 1, University of Caen and CNRS.

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