IDEAS home Printed from
MyIDEAS: Login to save this paper or follow this series

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:
Download Restriction: CEPR Discussion Papers are free to download for our researchers, subscribers and members. If you fall into one of these categories but have trouble downloading our papers, please contact us at

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.

Paper provided by C.E.P.R. Discussion Papers in its series CEPR Discussion Papers with number 7056.

in new window

Date of creation: Nov 2008
Date of revision:
Handle: RePEc:cpr:ceprdp:7056
Contact details of provider: Postal: Centre for Economic Policy Research, 77 Bastwick Street, London EC1V 3PZ.
Phone: 44 - 20 - 7183 8801
Fax: 44 - 20 - 7183 8820

Order Information: Email:

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. Andreas Roider, 2004. "Asset Ownership and Contractibility of Interaction," RAND Journal of Economics, The RAND Corporation, vol. 35(4), pages 787-802, Winter.
  2. 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.
  3. John Bennett & Elisabetta Iossa, 2002. "Building and Managing Facilities for Public Services," Economics and Finance Discussion Papers 02-08, Economics and Finance Section, School of Social Sciences, Brunel University.
  4. 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.
  5. Che, Y.K. & Hausch, D.B., 1997. "Cooperative Investments and the Value of Contracting," Working papers 9714, Wisconsin Madison - Social Systems.
  6. John Vickers & George Yarrow, 1988. "Privatization: An Economic Analysis," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262720116, June.
  7. Oliver Hart & John Moore, 1988. "Property Rights and the Nature of the Firm," Working papers 495, Massachusetts Institute of Technology (MIT), Department of Economics.
  8. Hart, Oliver, 1995. "Firms, Contracts, and Financial Structure," OUP Catalogue, Oxford University Press, number 9780198288817, July.
  9. 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.
  10. Eric Maskin & John Moore, 1999. "Implementation and Renegotiation," Harvard Institute of Economic Research Working Papers 1863, Harvard - Institute of Economic Research.
  11. Elisabetta Iossa, 2005. "Delegation of Contracting in the Private Provision of Public Services," The Centre for Market and Public Organisation 05/125, Department of Economics, University of Bristol, UK.
  12. Grossman, Sanford J & Hart, Oliver D, 1986. "The Costs and Benefits of Ownership: A Theory of Vertical and Lateral Integration," Journal of Political Economy, University of Chicago Press, vol. 94(4), pages 691-719, August.
  13. Schmidt,Klaus M., 1991. "The costs and benefits of privatization," Discussion Paper Serie A 330, University of Bonn, Germany.
  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. Rey, Patrick & Dewatripont, Mathias & Aghion, Philippe, 2004. "Transferable Control," Scholarly Articles 4481511, Harvard University Department of Economics.
  16. 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.
  17. Jean-Jacques Laffont & Jean Tirole, 1991. "Privatization and Incentives," Working papers 572, Massachusetts Institute of Technology (MIT), Department of Economics.
  18. J. Schuster, 1998. "Neither Public Nor Private: The Hybridization of Museums," Journal of Cultural Economics, Springer, vol. 22(2), pages 127-150, June.
  19. Mathias Dewatripont & Philippe Aghion & Patrick Rey, 2002. "On partial contracting," ULB Institutional Repository 2013/9627, ULB -- Universite Libre de Bruxelles.
  20. 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.
  21. Francesconi, Marco & Muthoo, Abhinay, 2006. "Control Rights in Public-Private Partnerships," CEPR Discussion Papers 5733, C.E.P.R. Discussion Papers.
  22. Klaus M. Schmidt, 1995. "Incomplete Contracts and Privatization," Discussion Paper Serie A 480, University of Bonn, Germany.
  23. Aghion, P. & Tirole, J., 1993. "On the Management of Innovation," Working papers 93-12, Massachusetts Institute of Technology (MIT), Department of Economics.
  24. repec:oup:qjecon:v:116:y:2001:i:4:p:1343-1372 is not listed on IDEAS
  25. repec:oup:qjecon:v:109:y:1994:i:4:p:1185-1209 is not listed on IDEAS
  26. Andrei Shleifer, 1998. "State Versus Private Ownership," NBER Working Papers 6665, National Bureau of Economic Research, Inc.
  27. Jean Tirole, 1999. "Incomplete Contracts: Where Do We Stand?," Econometrica, Econometric Society, vol. 67(4), pages 741-782, July.
  28. repec:oup:restud:v:66:y:1999:i:1:p:39-56 is not listed on IDEAS
  29. 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.
  30. Shapiro, C. & Willing, D.R., 1990. "Economic Rationales For The Scope Of Privatization," Papers 41, Princeton, Woodrow Wilson School - Discussion Paper.
  31. 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.
  32. repec:tpr:qjecon:v:116:y:2001:i:4:p:1343-1372 is not listed on IDEAS
  33. Mathias Dewatripont, 2006. "Transferable control," ULB Institutional Repository 2013/9649, ULB -- Universite Libre de Bruxelles.
  34. repec:oup:restud:v:66:y:1999:i:1:p:115-38 is not listed on IDEAS
  35. repec:oup:qjecon:v:112:y:1997:i:4:p:1127-61 is not listed on IDEAS
  36. David Martimort & Jérôme Pouyet, 2008. "To build or not to build: Normative and positive theories of public-private partnerships," Post-Print halshs-00754298, HAL.
  37. Besley, Timothy J. & Ghatak, Maitreesh, 2001. "Government versus Private Ownership of Public Goods," CEPR Discussion Papers 2725, C.E.P.R. Discussion Papers.
  38. 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.
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:cpr:ceprdp:7056. 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: ()

The email address of this maintainer does not seem to be valid anymore. Please ask to update the entry or send us the correct address

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.