IDEAS home Printed from https://ideas.repec.org/
MyIDEAS: Log in (now much improved!) to save this paper

How to design infrastructure contracts in a warning world: a critical appraisal of public-private partnerships

Listed author(s):
  • David Martimort

    (PSE - Paris School of Economics, PSE - Paris-Jourdan Sciences Economiques - CNRS - Centre National de la Recherche Scientifique - ENPC - École des Ponts ParisTech - EHESS - École des hautes études en sciences sociales - INRA - Institut National de la Recherche Agronomique - ENS Paris - École normale supérieure - Paris)

  • Stephane Straub

    ()

    (ARQADE - Atelier de Recherche Quantitative Appliquée au Développement Economique - UT1 - Université Toulouse 1 Capitole, IDEI - Institut d'économie industrielle - UT1 - Université Toulouse 1 Capitole, TSE - Toulouse School of Economics - Toulouse School of Economics)

We analyze how long-term uncertainty, for example, regarding future climate conditions, affects the design of concession contracts and organizational forms in a principal–agent context, with dynamic moral hazard, limited liability, and irreversibility constraints. The prospect of future, uncertain productivity shocks on the returns on the firm's effort creates an option value of delaying efforts, a course that exacerbates agency costs. Contracts and organizational forms are drafted to control this cost of delegated flexibility. The possibility for the agent to delay investment in response to uncertainty and irreversibility also elicits preference for unbundling different stages of the project through short-term contracts. Our analysis is relevant to infrastructure sectors that are sensitive to changing weather conditions and sheds a pessimistic light on the relevance of public–private partnerships in this context.

To our knowledge, this item is not available for download. To find whether it is available, there are three options:
1. Check below under "Related research" whether another version of this item is available online.
2. Check on the provider's web page whether it is in fact available.
3. Perform a search for a similarly titled item that would be available.

Paper provided by HAL in its series Post-Print with number halshs-01328640.

as
in new window

Length:
Date of creation: Feb 2016
Publication status: Published in International Economic Review, Wiley, 2016, 57 (1), pp.61-88. <10.1111/iere.12148>
Handle: RePEc:hal:journl:halshs-01328640
DOI: 10.1111/iere.12148
Note: View the original document on HAL open archive server: https://halshs.archives-ouvertes.fr/halshs-01328640
Contact details of provider: Web page: https://hal.archives-ouvertes.fr/

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. Aleix Calveras & Juan-Jose Ganuza & Esther Hauk, 2004. "Wild Bids. Gambling for Resurrection in Procurement Contracts," Journal of Regulatory Economics, Springer, vol. 26(1), pages 41-68, 07.
  2. Burguet, Roberto & Ganuza, Juan-José & Hauk, Esther, 2012. "Limited liability and mechanism design in procurement," Games and Economic Behavior, Elsevier, vol. 76(1), pages 15-25.
  3. Shalizi, Zmarak & Lecocq, Franck, 2009. "Climate change and the economics of targeted mitigation in sectors with long-lived capital stock," Policy Research Working Paper Series 5063, The World Bank.
  4. Antle, Rick & Bogetoft, Peter & Stark, Andrew W., 2001. "Information systems, incentives and the timing of investments," Journal of Accounting and Public Policy, Elsevier, vol. 20(4-5), pages 267-294.
  5. Jean-Jacques Laffont & Jean Tirole, 1993. "A Theory of Incentives in Procurement and Regulation," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262121743, January.
  6. David Martimort & Stéphane Straub, 2016. "How To Design Infrastructure Contracts In A Warming World: A Critical Appraisal Of Public–Private Partnerships," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 57, pages 61-88, 02.
  7. Avinash K. Dixit & Robert S. Pindyck, 1994. "Investment under Uncertainty," Economics Books, Princeton University Press, edition 1, number 5474.
  8. Geoffrey Heal & Antony Millner, 2013. "Uncertainty and decision in climate change economics," GRI Working Papers 108, Grantham Research Institute on Climate Change and the Environment.
  9. repec:adr:anecst:y:1989:i:15-16:p:13 is not listed on IDEAS
  10. David Martimort & Flavio Menezes & Myrna Wooders & ELISABETTA IOSSA & DAVID MARTIMORT, 2015. "The Simple Microeconomics of Public-Private Partnerships," Journal of Public Economic Theory, Association for Public Economic Theory, vol. 17(1), pages 4-48, 02.
  11. Marcel Boyer & Michel Moreaux, 1989. "Uncertainty, Capacity and Flexibility: the Monopoly Case," Annals of Economics and Statistics, GENES, issue 15-16, pages 291-313.
  12. Marco Francesconi & Abhinay Muthoo, 2011. "Control Rights In Complex Partnerships," Journal of the European Economic Association, European Economic Association, vol. 9(3), pages 551-589, 06.
  13. Martimort, David & Pouyet, Jerome, 2008. "To build or not to build: Normative and positive theories of public-private partnerships," International Journal of Industrial Organization, Elsevier, vol. 26(2), pages 393-411, March.
  14. Baron, David P & Myerson, Roger B, 1982. "Regulating a Monopolist with Unknown Costs," Econometrica, Econometric Society, vol. 50(4), pages 911-930, July.
  15. Patrick W. Schmitz, 2005. "Allocating Control in Agency Problems with Limited Liability and Sequential Hidden Actions," RAND Journal of Economics, The RAND Corporation, vol. 36(2), pages 318-336, Summer.
  16. Eva I. Hoppe & Patrick W. Schmitz, 2013. "Public-private partnerships versus traditional procurement: Innovation incentives and information gathering," RAND Journal of Economics, RAND Corporation, vol. 44(1), pages 56-74, March.
  17. repec:adr:anecst:y:1989:i:15-16 is not listed on IDEAS
  18. 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.
  19. Ohlendorf, Susanne & Schmitz, Patrick W, 2008. "Repeated Moral Hazard, Limited Liability, and Renegotiation," CEPR Discussion Papers 6725, C.E.P.R. Discussion Papers.
  20. Anil Arya & Jonathan Glover, 2001. "Option Value to Waiting Created by a Control Problem," Journal of Accounting Research, Wiley Blackwell, vol. 39(3), pages 405-415, December.
  21. Nieken, Petra & Schmitz, Patrick W., 2012. "Repeated moral hazard and contracts with memory: A laboratory experiment," Games and Economic Behavior, Elsevier, vol. 75(2), pages 1000-1008.
  22. Kunreuther, Howard C. & Michel-Kerjan, Erwann O., 2011. "At War with the Weather: Managing Large-Scale Risks in a New Era of Catastrophes," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262516543, January.
  23. Rogerson, William P, 1985. "Repeated Moral Hazard," Econometrica, Econometric Society, vol. 53(1), pages 69-76, January.
  24. Hart, Oliver, 1995. "Firms, Contracts, and Financial Structure," OUP Catalogue, Oxford University Press, number 9780198288817.
  25. de Bettignies, Jean-Etienne & Ross, Thomas W., 2009. "Public-private partnerships and the privatization of financing: An incomplete contracts approach," International Journal of Industrial Organization, Elsevier, vol. 27(3), pages 358-368, May.
  26. Kenneth J. Arrow & Anthony C. Fisher, 1974. "Environmental Preservation, Uncertainty, and Irreversibility," The Quarterly Journal of Economics, Oxford University Press, vol. 88(2), pages 312-319.
  27. George Stigler, 1939. "Production and Distribution in the Short Run," Journal of Political Economy, University of Chicago Press, vol. 47, pages 305-305.
  28. Boyer, Marcel & Robert, Jacques, 2006. "Organizational inertia and dynamic incentives," Journal of Economic Behavior & Organization, Elsevier, vol. 59(3), pages 324-348, March.
  29. Susanne Ohlendorf & Patrick W. Schmitz, 2012. "Repeated Moral Hazard And Contracts With Memory: The Case Of Risk‐Neutrality," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 53(2), pages 433-452, 05.
  30. Robert A. Jones & Joseph M. Ostroy, 1984. "Flexibility and Uncertainty," Review of Economic Studies, Oxford University Press, vol. 51(1), pages 13-32.
  31. Vives, Xavier, 1989. "Technological competition, uncertainty, and oligopoly," Journal of Economic Theory, Elsevier, vol. 48(2), pages 386-415, August.
  32. Henry, Claude, 1974. "Investment Decisions Under Uncertainty: The "Irreversibility Effect."," American Economic Review, American Economic Association, vol. 64(6), pages 1006-1012, December.
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:hal:journl:halshs-01328640. 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: (CCSD)

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.