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Task Interdependence and Noncontractibility in Public-Good Provision

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Listed:
  • Bin R. Chen
  • Y. Stephen Chiu

Abstract

In the context of public-good provision, despite noncontractibility of investments, it is possible to specify who is in charge of tasks such as construction and maintenance. We show that complementarity between the investments of the two tasks favors unbundling of tasks through different contracts against bundling of them into a single contract, whether the built facility is privately or publicly owned. We also obtain general conditions that determine the efficiency of traditional procurement vis-à-vis public-private partnership (PPP).

Suggested Citation

  • Bin R. Chen & Y. Stephen Chiu, 2014. "Task Interdependence and Noncontractibility in Public-Good Provision," Journal of Institutional and Theoretical Economics (JITE), Mohr Siebeck, Tübingen, vol. 170(4), pages 731-748, December.
  • Handle: RePEc:mhr:jinste:urn:sici:0932-4569(201412)170:4_731:tianip_2.0.tx_2-r
    DOI: 10.1628/093245613X14001382825066
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    References listed on IDEAS

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    1. Schmitz, Patrick W., 2013. "Incomplete contracts and optimal ownership of public goods," Economics Letters, Elsevier, vol. 118(1), pages 94-96.
    2. Aghion, P. & Tirole, J., 1993. "On the Management of Innovation," Working papers 93-12, Massachusetts Institute of Technology (MIT), Department of Economics.
    3. Vladimir Smirnov & Andrew Wait, 2004. "Hold-up and Sequential Specific Investments," RAND Journal of Economics, The RAND Corporation, vol. 35(2), pages 386-400, Summer.
    4. Hoppe, Eva I. & Schmitz, Patrick W., 2010. "Public versus private ownership: Quantity contracts and the allocation of investment tasks," Journal of Public Economics, Elsevier, vol. 94(3-4), pages 258-268, April.
    5. Chen, Bin R. & Chiu, Y. Stephen, 2010. "Public-private partnerships: Task interdependence and contractibility," International Journal of Industrial Organization, Elsevier, vol. 28(6), pages 591-603, November.
    6. repec:hrv:faseco:30727607 is not listed on IDEAS
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    Cited by:

    1. Schmitz, Patrick W., 2015. "Government versus private ownership of public goods: The role of bargaining frictions," Journal of Public Economics, Elsevier, vol. 132(C), pages 23-31.

    More about this item

    JEL classification:

    • D23 - Microeconomics - - Production and Organizations - - - Organizational Behavior; Transaction Costs; Property Rights
    • H11 - Public Economics - - Structure and Scope of Government - - - Structure and Scope of Government
    • L33 - Industrial Organization - - Nonprofit Organizations and Public Enterprise - - - Comparison of Public and Private Enterprise and Nonprofit Institutions; Privatization; Contracting Out

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