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A Theory of BOT Concession Contracts

  • Auriol, Emmanuelle
  • Picard, Pierre

In this paper, we discuss the choice for build-operate-and-transfer (BOT) concessions when governments and rm managers do not share the same information regarding the operation characteristics of a facility. We show that larger shadow costs of public funds and larger information asymmetries entice governments to choose BOT concessions. This result stems from a trade-o¤ between the government’s shadow costs of nancing the construction and the operation of the facility and the excessive usage price that the consumer may face during the concession period. The incentives to choose BOT concessions increase as a function of ex-ante informational asymmetries between governments and potential BOT concession holders and with the possibility of transferring the concession cost characteristics to public rms at the termination of the concession.

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Paper provided by Toulouse School of Economics (TSE) in its series TSE Working Papers with number 11-228.

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Date of creation: 25 Mar 2011
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Publication status: Published in Journal of Economic Behavior and Organization, vol.�89, 2013, p.�187-209.
Handle: RePEc:tse:wpaper:24307
Contact details of provider: Phone: (+33) 5 61 12 86 23
Web page: http://www.tse-fr.eu/

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  20. Guasch, J. Luis & Laffont, Jean-Jacques & Straub, Stéphane, 2008. "Renegotiation of concession contracts in Latin America: Evidence from the water and transport sectors," International Journal of Industrial Organization, Elsevier, vol. 26(2), pages 421-442, March.
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