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Government Opportunism in Public-Private Partnerships

Author

Listed:
  • David Martimort
  • Flavio Menezes
  • Myrna Wooders
  • VANESSA VALERO

Abstract

This paper analyzes the contracting out of public services through public-private partnerships (PPP) subject to government opportunism. In PPP, the building of public infra-structure and the provision of related services are procured through only one contract. On the one hand, such bundling of tasks provides incentives to invest in the infrastructure to minimize the cost of providing public services over the long term. On the other hand, it creates incentives for the government to behave opportunistically, by not respecting the terms of the long-term contractual agreement. Contrarily, in the traditional procurement (TP), the public service provision tasks are contracted out separately. The purpose of this paper is two fold. First, we show that government commitment not to engage in opportunistic behavior is the key factor determining the cost efficiency of PPP. Second, we specify the economic determinants of government's choice between PPP and TP under government opportunism.

Suggested Citation

  • David Martimort & Flavio Menezes & Myrna Wooders & VANESSA VALERO, 2015. "Government Opportunism in Public-Private Partnerships," Journal of Public Economic Theory, Association for Public Economic Theory, vol. 17(1), pages 111-135, February.
    • Handle: RePEc:bla:jpbect:v:17:y:2015:i:1:p:111-135
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    File URL: http://hdl.handle.net/10.1111/jpet.12105
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    References listed on IDEAS

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    1. David Martimort & Flavio Menezes & Myrna Wooders & ELISABETTA IOSSA & DAVID MARTIMORT, 2015. "The Simple Microeconomics of Public-Private Partnerships," Journal of Public Economic Theory, Association for Public Economic Theory, vol. 17(1), pages 4-48, February.
    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.
    3. Fudenberg, Drew & Tirole, Jean, 1990. "Moral Hazard and Renegotiation in Agency Contracts," Econometrica, Econometric Society, vol. 58(6), pages 1279-1319, November.
    4. J. Luis Guasch & Jean-Jacques Laffont & Stéphane Straub, 2007. "Concessions of infrastructure in Latin America: Government-led renegotiation," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 22(7), pages 1267-1294.
    5. Elisabetta Iossa & David Martimort, 2011. "The Theory of Incentives Applied to the Transport Sector," Chapters, in: André de Palma & Robin Lindsey & Emile Quinet & Roger Vickerman (ed.), A Handbook of Transport Economics, chapter 29, Edward Elgar Publishing.
    6. J. Luis Guasch, 2004. "Granting and Renegotiating Infrastructure Concessions : Doing it Right," World Bank Publications - Books, The World Bank Group, number 15024, December.
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    Cited by:

    1. Engel, Eduardo M.R:A. & Fischer, Ronald & Galetovic, Alexander, 2019. "Soft budgets and endogenous renegotiations in transport PPPs: An equilibrium analysis," Economics of Transportation, Elsevier, vol. 17(C), pages 40-50.
    2. 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.
    3. Alexandre Mayol & Stéphane Saussier, 2020. "Retaking Control of Local Public Services A Step-by-Step Strategy," Working Papers of BETA 2020-43, Bureau d'Economie Théorique et Appliquée, UDS, Strasbourg.
    4. Bertrand V. Quelin & Sandro Cabral & Sergio Lazzarini & Ilze Kivleniece, 2019. "The Private Scope in Public–Private Collaborations: An Institutional and Capability-Based Perspective," Organization Science, INFORMS, vol. 30(4), pages 831-846, July.
    5. Shiying Shi & Heap-Yih Chong & Lihong Liu & Xiaosu Ye, 2016. "Examining the Interrelationship among Critical Success Factors of Public Private Partnership Infrastructure Projects," Sustainability, MDPI, vol. 8(12), pages 1-20, December.
    6. Ronit Mukherji, 2023. "Risk Sharing in Public-Private Partnerships," SN Operations Research Forum, Springer, vol. 4(4), pages 1-17, December.
    7. Liu, Jiaqi & Liu, Jicai & Bu, Zehui & Zhou, Yining & He, Peifen, 2022. "Path analysis of influencing government's excessive behavior in PPP project: Based on field dynamic theory," Transportation Research Part A: Policy and Practice, Elsevier, vol. 166(C), pages 522-540.

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