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Competition for Local Public Services with Learning-by-doing and Transferability

Author

Listed:
  • Klênio de Souza Barbosa
  • Pierre C. Boyer

Abstract

Many local governments allow competition between public and private rms for provision of local public services in order to reduce procurement cost. Competition is usually introduced through competitive tendering for concession contracts. We show that in a symmetric competition between public and private rms with learning-by-doing, private rm's ability to transfer learning among concessions may reduce consumer's welfare. The model provides testable implications which are consistent with the empirical evidence: little competition for concessions, retail prices higher under private operation than under public one, and subsidies and retail prices to service providers increased over time. In addition, consumers' gains from switching to private ownership are higher in industries where private rms have low-ability to transfer learning among di erent concessions.

Suggested Citation

  • Klênio de Souza Barbosa & Pierre C. Boyer, 2011. "Competition for Local Public Services with Learning-by-doing and Transferability," Working Papers 06-2011, Universidade de São Paulo, Faculdade de Economia, Administração e Contabilidade de Ribeirão Preto.
  • Handle: RePEc:fea:wpaper:06-2011
    as

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    File URL: ftp://cpq.fearp.usp.br:2300/textos_discussao/eco/2011/TD-E06-2011.pdf
    File Function: First version, 2011
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    References listed on IDEAS

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    Cited by:

    1. Klenio Barbosa & Pierre C. Boyer, 2012. "Discrimination in Dynamic Procurement Design with Learning-by-doing," CESifo Working Paper Series 3947, CESifo Group Munich.

    More about this item

    Keywords

    Sequential Auction; Public versus Private Firms; Learning-by-doing; Transferability of Learning;

    JEL classification:

    • D44 - Microeconomics - - Market Structure, Pricing, and Design - - - Auctions
    • H57 - Public Economics - - National Government Expenditures and Related Policies - - - Procurement
    • H70 - Public Economics - - State and Local Government; Intergovernmental Relations - - - General
    • H87 - Public Economics - - Miscellaneous Issues - - - International Fiscal Issues; International Public Goods

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