IDEAS home Printed from https://ideas.repec.org/
MyIDEAS: Log in (now much improved!) to save this article

Public versus private ownership: Quantity contracts and the allocation of investment tasks

  • Hoppe, Eva I.
  • Schmitz, Patrick W.

The government wants a certain good or service to be provided. Should the required assets be publicly or privately owned or should a partnership be formed? Building on the incomplete contracting approach, we argue that the initially specified quantity of an ex ante describable basic good can have important effects on investment incentives, which has been neglected in the literature so far. We also study how the tasks of investing in quality improvements and cost reductions should be assigned. We show how the optimal contracts and governance structures depend on the exogenous parameters of the model such as the nature of the investments and the parties' bargaining powers.

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.

File URL: http://www.sciencedirect.com/science/article/pii/S0047-2727(09)00149-2
Download Restriction: Full text for ScienceDirect subscribers only

As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.

Article provided by Elsevier in its journal Journal of Public Economics.

Volume (Year): 94 (2010)
Issue (Month): 3-4 (April)
Pages: 258-268

as
in new window

Handle: RePEc:eee:pubeco:v:94:y:2010:i:3-4:p:258-268
Contact details of provider: Web page: http://www.elsevier.com/locate/inca/505578

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:

as in new window
  1. Joaquin Sevilla, 2005. "Accountability and Control of Public Spending in a Decentralised and Delegated Environment," OECD Journal on Budgeting, OECD Publishing, vol. 5(2), pages 7-21.
  2. Schmidt, Klaus M., 1996. "Incomplete contracts and privatization," European Economic Review, Elsevier, vol. 40(3-5), pages 569-579, April.
  3. Francesconi, Marco & Muthoo, Abhinay, 2006. "Control Rights in Public-Private Partnerships," CEPR Discussion Papers 5733, C.E.P.R. Discussion Papers.
  4. John Bennett & Elisabetta Iossa, 2005. "Delegation of Contracting in the Private Provision of Public Services," Economics and Finance Discussion Papers 05-15, Economics and Finance Section, School of Social Sciences, Brunel University.
  5. Patrick W. Schmitz, 2000. "Partial Privatization and Incomplete Contracts: The Proper Scope of Government Reconsidered," FinanzArchiv: Public Finance Analysis, Mohr Siebeck, Tübingen, vol. 57(4), pages 394-411, August.
  6. Bennett, John & Elisabetta Iossa, 2002. "Building and Managing Facilities for Public Services," Royal Economic Society Annual Conference 2002 22, Royal Economic Society.
  7. Andrei Shleifer, 1998. "State Versus Private Ownership," NBER Working Papers 6665, National Bureau of Economic Research, Inc.
  8. Patrick W. Schmitz, 2006. "Information Gathering, Transaction Costs, and the Property Rights Approach," American Economic Review, American Economic Association, vol. 96(1), pages 422-434, March.
  9. Schmidt,Klaus M., 1991. "The costs and benefits of privatization," Discussion Paper Serie A 330, University of Bonn, Germany.
  10. Schmidt, Klaus M., 1996. "The costs and benefits of privatization: An incomplete contracts approach," Munich Reprints in Economics 19773, University of Munich, Department of Economics.
  11. repec:esx:essedp:612 is not listed on IDEAS
  12. Hart, Oliver D. & Moore, John, 1990. "Property Rights and the Nature of the Firm," Scholarly Articles 3448675, Harvard University Department of Economics.
  13. Oliver Hart & Andrei Shleifer & Robert W. Vishny, 1996. "The Proper Scope of Government: Theory and an Application to Prisons," NBER Working Papers 5744, National Bureau of Economic Research, Inc.
  14. Holmstrom, Bengt & Milgrom, Paul, 1991. "Multitask Principal-Agent Analyses: Incentive Contracts, Asset Ownership, and Job Design," Journal of Law, Economics and Organization, Oxford University Press, vol. 7(0), pages 24-52, Special I.
  15. Mathias Dewatripont & Philippe Aghion & Patrick Rey, 2004. "Transferable control," ULB Institutional Repository 2013/9647, ULB -- Universite Libre de Bruxelles.
  16. Donald B. Hausch & Yeon-Koo Che, 1999. "Cooperative Investments and the Value of Contracting," American Economic Review, American Economic Association, vol. 89(1), pages 125-147, March.
  17. Eric Maskin & John Moore, 1999. "Implementation and Renegotiation," Harvard Institute of Economic Research Working Papers 1863, Harvard - Institute of Economic Research.
  18. Huberman, Gur & Kahn, Charles M, 1988. "Limited Contract Enforcement and Strategic Renegotiation," American Economic Review, American Economic Association, vol. 78(3), pages 471-84, June.
  19. Martimort, David & Pouyet, Jerome, 2008. "To build or not to build: Normative and positive theories of public-private partnerships," International Journal of Industrial Organization, Elsevier, vol. 26(2), pages 393-411, March.
  20. Oliver Hart & John Moore, 1998. "Foundations of Incomplete Contracts," Harvard Institute of Economic Research Working Papers 1846, Harvard - Institute of Economic Research.
  21. Andreas Roider, 2004. "Asset Ownership and Contractibility of Interaction," RAND Journal of Economics, The RAND Corporation, vol. 35(4), pages 787-802, Winter.
  22. David Martimort, 2006. "An Agency Perspective on the Costs and Benefits of Privatization," Journal of Regulatory Economics, Springer, vol. 30(1), pages 5-44, 07.
  23. Oliver Hart & Sanford Grossman, 1985. "The Costs and Benefits of Ownership: A Theory of Vertical and Lateral Integration," Working papers 372, Massachusetts Institute of Technology (MIT), Department of Economics.
  24. Hart, Oliver, 1995. "Firms, Contracts, and Financial Structure," OUP Catalogue, Oxford University Press, number 9780198288817, December.
  25. Laffont, Jean-Jacques & Tirole, Jean, 1991. "Privatization and Incentives," Journal of Law, Economics and Organization, Oxford University Press, vol. 7(0), pages 84-105, Special I.
  26. J. Schuster, 1998. "Neither Public Nor Private: The Hybridization of Museums," Journal of Cultural Economics, Springer, vol. 22(2), pages 127-150, June.
  27. Aghion, Philippe & Dewatripont, Mathias & Rey, Patrick, 2002. "On partial contracting," European Economic Review, Elsevier, vol. 46(4-5), pages 745-753, May.
  28. Shapiro, C. & Willing, D.R., 1990. "Economic Rationales For The Scope Of Privatization," Papers 41, Princeton, Woodrow Wilson School - Discussion Paper.
  29. Timothy Besley & Maitreesh Ghatak, 2001. "Government Versus Private Ownership of Public Goods," The Quarterly Journal of Economics, Oxford University Press, vol. 116(4), pages 1343-1372.
  30. Bos, Dieter & De Fraja, Gianni, 2002. "Quality and outside capacity in the provision of health services," Journal of Public Economics, Elsevier, vol. 84(2), pages 199-218, May.
  31. Georg Nöldeke & Klaus M. Schmidt, 1992. "Option Contracts and Renegotiation - A Solution to the Hold-Up Problem," Discussion Paper Serie A 417, University of Bonn, Germany, revised Aug 1993.
  32. Aghion, P. & Tirole, J., 1993. "On the Management of Innovation," Working papers 93-12, Massachusetts Institute of Technology (MIT), Department of Economics.
  33. Jean Tirole, 1999. "Incomplete Contracts: Where Do We Stand?," Econometrica, Econometric Society, vol. 67(4), pages 741-782, July.
  34. Philippe Aghion & Jean Tirole, 1994. "The Management of Innovation," The Quarterly Journal of Economics, Oxford University Press, vol. 109(4), pages 1185-1209.
  35. John Vickers & George Yarrow, 1988. "Privatization: An Economic Analysis," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262720116, December.
Full references (including those not matched with items on IDEAS)

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

When requesting a correction, please mention this item's handle: RePEc:eee:pubeco:v:94:y:2010:i:3-4:p:258-268. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Shamier, Wendy)

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.

This information is provided to you by IDEAS at the Research Division of the Federal Reserve Bank of St. Louis using RePEc data.