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Public-private partnerships versus traditional procurement: An experimental investigation

Author

Listed:
  • Eva I. Hoppe

    (Department of Economics, University of Cologne)

  • David J. Kusterer

    (Department of Economics, University of Cologne)

  • Patrick W. Schmitz

    (Department of Economics, University of Cologne)

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

  • Eva I. Hoppe & David J. Kusterer & Patrick W. Schmitz, 2011. "Public-private partnerships versus traditional procurement: An experimental investigation," Cologne Graduate School Working Paper Series 02-02, Cologne Graduate School in Management, Economics and Social Sciences.
  • Handle: RePEc:cgr:cgsser:02-02
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    References listed on IDEAS

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    More about this item

    Keywords

    experiment; incomplete contracts; procurement; public-private partnerships;
    All these keywords.

    JEL classification:

    • D86 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Economics of Contract Law
    • 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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