Infrastructure Contracts: Trust and Institutional Updating
This paper discusses trust and trust perceptions in infrastructure contracts and supporting institutions. We focus on perceptions of the trustworthiness of the government purchasers of infrastructure services by the supplying companies and by the governments themselves. In particular, we allow for trust updating and trust misalignments which may give rise to "undertrusting" and "overtrusting". The core of the paper sets out a game theoretic model of contracts with dynamic adjustment of trust perceptions, which we use to explore the impact of trust misalignment both on economic efficiency (measured by expected welfare) and on investment levels. We explore flexible contracts with and without pre-payments, rigid contracts (which do not allow for post-investment renegotiation) and hybrid contracts. We then compare the efficiency of the flexible contracts to that of hybrid contracts using as a criterion the expected welfare implications of each contract. The model is used to shed light on current issues on the sustainability of private investment infrastructure contracts in developed and in developing countries, including the role of regulatory institutions.
(This abstract was borrowed from another version of this item.)
Volume (Year): 35 (2009)
Issue (Month): 1 (September)
|Contact details of provider:|| Web page: http://www.springer.com|
|Order Information:||Web: http://www.springer.com/economics/industrial+organization/journal/11151/PS2|
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.:
- Greif, Avner, 1993. "Contract Enforceability and Economic Institutions in Early Trade: the Maghribi Traders' Coalition," American Economic Review, American Economic Association, vol. 83(3), pages 525-48, June.
- Luis Araujo & Emanuel Ornelas, 2007.
LSE Research Online Documents on Economics
19693, London School of Economics and Political Science, LSE Library.
- Tirole, Jean, 2008.
"Cognition and Incomplete Contracts,"
IDEI Working Papers
453, Institut d'Économie Industrielle (IDEI), Toulouse.
- John McMillan & Christopher Woodruff, 1998.
"Interfirm Relationships and Informal Credit in Vietnam,"
William Davidson Institute Working Papers Series
132, William Davidson Institute at the University of Michigan.
- John McMillan & Christopher Woodruff, 1999. "Interfirm Relationships and Informal Credit in Vietnam," The Quarterly Journal of Economics, Oxford University Press, vol. 114(4), pages 1285-1320.
- McMillan, John & Woodruff, Christopher, 1998. "Inter-Firm Relationships and Informal Credit in Vietnam," CEPR Discussion Papers 2036, C.E.P.R. Discussion Papers.
- Williamson, Oliver E, 1976. "The Economics of Internal Organization: Exit and Voice in Relation to Markets and Hierarchies," American Economic Review, American Economic Association, vol. 66(2), pages 369-77, May.
- Anderson James E & Young Leslie, 2006. "Trade and Contract Enforcement," The B.E. Journal of Economic Analysis & Policy, De Gruyter, vol. 5(1), pages 1-36, November.
- repec:bpj:rneart:v:1:y:2002:i:1:p:1-38 is not listed on IDEAS
- Paul Levine & John Stern & Francesc Trillas, 2005. "Utility price regulation and time inconsistency: comparisons with monetary policy," Oxford Economic Papers, Oxford University Press, vol. 57(3), pages 447-478, July.
- Littlechild Stephen, 2002.
"Competitive Bidding for a Long-Term Electricity Distribution Contract,"
Review of Network Economics,
De Gruyter, vol. 1(1), pages 1-38, March.
- Littlechild, S.C., 2001. "Competitive Bidding for a Long-term Electricity Distribution Contract," Cambridge Working Papers in Economics 0112, Faculty of Economics, University of Cambridge.
- J. Luis Guasch & Stéphane Straub, 2006. "Renegotiation Of Infrastructure Concessions: An Overview," Annals of Public and Cooperative Economics, Wiley Blackwell, vol. 77(4), pages 479-493, December.
- Claude Ménard & Stéphane Saussier, 2000. "Contractual Choice and Performance the Case of Water Supply in France," Revue d'Économie Industrielle, Programme National Persée, vol. 92(1), pages 385-404.
- Pablo T. Spiller, 2009.
"An Institutional Theory of Public Contracts: Regulatory Implications,"
in: Regulation, Deregulation, Reregulation, chapter 3
Edward Elgar Publishing.
- Pablo T. Spiller, 2008. "An Institutional Theory of Public Contracts: Regulatory Implications," NBER Working Papers 14152, National Bureau of Economic Research, Inc.
- Laffont,Jean-Jacques, 2005.
"Regulation and Development,"
Cambridge University Press, number 9780521840187, October.
When requesting a correction, please mention this item's handle: RePEc:kap:revind:v:35:y:2009:i:1:p:171-216. 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: (Sonal Shukla)or (Rebekah McClure)
If references are entirely missing, you can add them using this form.