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Public-private partnerships versus traditional procurement: An experimental investigation

  • 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)

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.

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Paper provided by Cologne Graduate School in Management, Economics and Social Sciences in its series Cologne Graduate School Working Paper Series with number 02-02.

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Date of creation: Jan 2011
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Handle: RePEc:cgr:cgsser:02-02
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