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Public–private partnerships versus traditional procurement: An experimental investigation

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  • Hoppe, Eva I.
  • Kusterer, David J.
  • Schmitz, Patrick W.

Abstract

A government agency wants an infrastructure-based public service to be provided. Our experimental study compares two different modes of provision. In a public–private partnership, the two tasks of building the infrastructure and operating it are delegated to one private contractor (a consortium), while under traditional procurement, these tasks are delegated to separate contractors. We find support for the theoretical prediction that, compared to traditional procurement, a public–private partnership provides stronger incentives to make cost-reducing investments (which may increase or decrease service quality). In two additional treatments, we study governance structures which explicitly take subcontracting within private consortia into account.

Suggested Citation

  • Hoppe, Eva I. & Kusterer, David J. & Schmitz, Patrick W., 2013. "Public–private partnerships versus traditional procurement: An experimental investigation," Journal of Economic Behavior & Organization, Elsevier, vol. 89(C), pages 145-166.
    • Handle: RePEc:eee:jeborg:v:89:y:2013:i:c:p:145-166
    DOI: 10.1016/j.jebo.2011.05.001
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    More about this item

    Keywords

    Public–private partnerships; Procurement; Incomplete contracts; Experiment;
    All these keywords.

    JEL classification:

    • D86 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Economics of Contract Law
    • L33 - Industrial Organization - - Nonprofit Organizations and Public Enterprise - - - Comparison of Public and Private Enterprise and Nonprofit Institutions; Privatization; Contracting Out
    • H11 - Public Economics - - Structure and Scope of Government - - - Structure and Scope of Government

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