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Hold-up Problems in Contracting Out Waste Collection Services

Author

Listed:
  • Hiroaki Ino

    () (School of Economics, Kwansei Gakuin University)

  • Norimichi Matsueda

    () (School of Economics, Kwansei Gakuin University)

  • Jun'ichi Miki

    () (Faculty of Humanities and Social Sciences, Tohoku University of Community Service and Science)

Abstract

It is reported previously that, in contracting out waste collection services to pri- vate enterprises, there is generally an inverse relationship between the contracting- out rate and the contract price, but this inverse relationship levels out as the degree of contracting-out increases and the contract price even goes up eventually as the contracting rate approaches 100%. In this paper, we construct a simple bargain- ing model between municipal governments and private rms and identify how the bargaining equilibrium differs from an outcome where municipal governments can make take-it-or-leave-it offers to private enterprises. Through a simple simulation analysis, in addition, we demonstrate that hold-up concerns of local governments can indeed lead to a U-shaped relationship between the contracting-out rate and the contract price across different municipalities.

Suggested Citation

  • Hiroaki Ino & Norimichi Matsueda & Jun'ichi Miki, 2019. "Hold-up Problems in Contracting Out Waste Collection Services," Discussion Paper Series 186, School of Economics, Kwansei Gakuin University, revised Jan 2019.
  • Handle: RePEc:kgu:wpaper:186
    as

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    File URL: http://192.218.163.163/RePEc/pdf/kgdp186.pdf
    File Function: First version, 2019
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    References listed on IDEAS

    as
    1. Eoin Reeves & Michael Barrow, 2000. "The Impact of Contracting Out on the Costs of Refuse Collection Services - The Case of Ireland," The Economic and Social Review, Economic and Social Studies, vol. 31(2), pages 129-150.
    2. Stevens, Barbara J, 1978. "Scale, Market Structure, and the Cost of Refuse Collection," The Review of Economics and Statistics, MIT Press, vol. 60(3), pages 438-448, August.
    3. Henry Ohlsson, 2003. "Ownership and Production Costs: Choosing between Public Production and Contracting-Out in the Case of Swedish Refuse Collection," Fiscal Studies, Institute for Fiscal Studies, vol. 24(4), pages 451-476, December.
    4. Hart, Oliver, 1995. "Firms, Contracts, and Financial Structure," OUP Catalogue, Oxford University Press, number 9780198288817.
    5. Norimichi Matsueda & Jun'ichi Miki, 2013. "Contracting-Out of Household Waste Collection Services in Japan," Discussion Paper Series 111, School of Economics, Kwansei Gakuin University, revised Nov 2013.
    6. Domberger, Simon & Jensen, Paul, 1997. "Contracting Out by the Public Sector: Theory, Evidence, Prospects," Oxford Review of Economic Policy, Oxford University Press, vol. 13(4), pages 67-78, Winter.
    Full references (including those not matched with items on IDEAS)

    More about this item

    Keywords

    bargaining; contracting-out; contract price; hold-up; waste collection;

    JEL classification:

    • H42 - Public Economics - - Publicly Provided Goods - - - Publicly Provided Private Goods
    • L33 - Industrial Organization - - Nonprofit Organizations and Public Enterprise - - - Comparison of Public and Private Enterprise and Nonprofit Institutions; Privatization; Contracting Out

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