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Incomplete contracts and optimal ownership of public goods

  • Schmitz, Patrick W.

The government and a non-governmental organization (NGO) can invest in the provision of a public good. In an incomplete contracting framework, Besley and Ghatak (2001) have argued that the party who values the public good most should be the owner. We show that this conclusion relies on their assumption that the parties split the renegotiation surplus 50:50. If the generalized Nash bargaining solution is applied, then for any pair of valuations that the two parties may have, there exist bargaining powers such that either ownership by the government or by the NGO can be optimal.

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Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 41730.

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Date of creation: Sep 2012
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Handle: RePEc:pra:mprapa:41730
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  1. Francesconi, Marco & Muthoo, Abhinay, 2010. "Control Rights in Complex Partnerships," The Warwick Economics Research Paper Series (TWERPS) 933, University of Warwick, Department of Economics.
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  12. Nöldeke, Georg & Schmidt, Klaus M., 1997. "Sequential Investments and Options to Own," CEPR Discussion Papers 1645, C.E.P.R. Discussion Papers.
  13. Jean Tirole, 1999. "Incomplete Contracts: Where Do We Stand?," Econometrica, Econometric Society, vol. 67(4), pages 741-782, July.
  14. Schmitz, Patrick W, 2005. "Information Gathering, Transaction Costs and the Property Rights Approach," CEPR Discussion Papers 5417, C.E.P.R. Discussion Papers.
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  18. Schmitz, Patrick W, 2012. "Public goods and the hold-up problem under asymmetric information," CEPR Discussion Papers 9065, C.E.P.R. Discussion Papers.
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  20. Maija Halonen-Akatwijuka & Evagelos Pafilis, 2009. "Reputation and Ownership of Public Goods," The Centre for Market and Public Organisation 09/211, Department of Economics, University of Bristol, UK.
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