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Incomplete contracts and optimal ownership of public goods

  • Schmitz, Patrick W.

The government and a non-governmental organization (NGO) can invest in the provision of a public good. Besley and Ghatak (2001) have argued that in an incomplete contracting framework, the party who values the public good most should be the owner. We show that this conclusion relies on their assumption that the parties split the renegotiation surplus 50:50. If the generalized Nash bargaining solution is applied, then for any pair of valuations that the two parties may have, there exist bargaining powers such that either ownership by the government or by the NGO can be optimal.

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Article provided by Elsevier in its journal Economics Letters.

Volume (Year): 118 (2013)
Issue (Month): 1 ()
Pages: 94-96

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Handle: RePEc:eee:ecolet:v:118:y:2013:i:1:p:94-96
Contact details of provider: Web page: http://www.elsevier.com/locate/ecolet

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  17. Ariel Rubinstein, 2010. "Perfect Equilibrium in a Bargaining Model," Levine's Working Paper Archive 661465000000000387, David K. Levine.
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