Government Outsourcing: Public Contracting with Private Monopoly
The paper studies the impact of government budget constraint in a pure adverse selection problem of monopoly regulation. The government maximizes total surplus but incurs some cost of public funds à la Laffont and Tirole (1993). An alternative to regulation is proposed in which firms are free to enter the market and to choose their price and output levels. However the government can contract ex-post with the private firms. This ex-post contracting set-up allows more flexibility than traditional regulation where governments commit to both investment and operation cash-flows. This is especially relevant in case of high technological uncertainties.
(This abstract was borrowed from another version of this item.)
|Date of creation:||Jun 2008|
|Date of revision:|
|Publication status:||Published in The Economic Journal, vol.�119, n°540, octobre 2009, p.�1464-1493.|
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