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Risk allocation and the costs and benefits of public--private partnerships

Listed author(s):
  • Elisabetta Iossa

    (CEPR - Center for Economic Policy Research - CEPR, Università degli Studi di Roma Tor Vergata [Roma])

  • David Martimort

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

We study the agency costs of delegated public service provision, focusing on the link between organizational forms and uncertainty at project implementation. We consider a dynamic multitask moral hazard environment where the mapping between effort and performance is ex ante uncertain but new information may arise during operations. Our analysis highlights the costs and benefits that bundling planning and implementation--as under public--private partnerships--can bring in terms of project design and operational costs under various scenarios, possibly allowing for asymmetric information, moral hazard and renegotiation. It also shows that relying on private finance enhances the benefits of bundling only if lenders have enough expertise to assess project risks.

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Paper provided by HAL in its series PSE - Labex "OSE-Ouvrir la Science Economique" with number hal-00813153.

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Length:
Date of creation: Apr 2012
Publication status: Published in RAND Journal of Economics, Wiley, 2012, 43 (3), pp.442-474. 〈10.1111/j.1756-2171.2012.00181.x〉
Handle: RePEc:hal:pseose:hal-00813153
DOI: 10.1111/j.1756-2171.2012.00181.x
Note: View the original document on HAL open archive server: https://hal-pjse.archives-ouvertes.fr/hal-00813153
Contact details of provider: Web page: https://hal.archives-ouvertes.fr/

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