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A note on fixed and flexible-term contracts

Author

Listed:
  • Daniel Danau

    (Université de Cergy-Pontoise)

Abstract

Engel et al. (1997 2001 2007) have proposed flexible-term contracts as a solution to suboptimal renegotiation of public-private partnerships. We show that whenever the uncertainty lasts over more than two periods, flexible-term contracts have a drawback. The expected duration of a flexible-term contract can be higher than the (certain) duration of a fixed-term contract, the difference being directly proportional to the volatility of the project.

Suggested Citation

  • Daniel Danau, 2009. "A note on fixed and flexible-term contracts," Economics Bulletin, AccessEcon, vol. 29(2), pages 964-975.
    • Handle: RePEc:ebl:ecbull:eb-08d80037
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    File URL: http://www.accessecon.com/Pubs/EB/2009/Volume29/EB-09-V29-I2-P45.pdf
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    Citations

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    Cited by:

    1. David Martimort & Flavio Menezes & Myrna Wooders & DANIEL DANAU & ANNALISA VINELLA, 2015. "Public-Private Contracting under Limited Commitment," Journal of Public Economic Theory, Association for Public Economic Theory, vol. 17(1), pages 78-110, February.
    2. Daniel Danau & Annalisa Vinella, 2013. "From fixed to state-dependent duration in public-private contracts," Economics Working Paper Archive (University of Rennes 1 & University of Caen) 201344, Center for Research in Economics and Management (CREM), University of Rennes 1, University of Caen and CNRS, revised Jan 2015.

    More about this item

    Keywords

    public-private partnerships;

    JEL classification:

    • D8 - Microeconomics - - Information, Knowledge, and Uncertainty

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