Premium
Risk allocation and the costs and benefits of public‐‐private partnerships
Author(s) -
Iossa Elisabetta,
Martimort David
Publication year - 2012
Publication title -
the rand journal of economics
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 3.687
H-Index - 108
eISSN - 1756-2171
pISSN - 0741-6261
DOI - 10.1111/j.1756-2171.2012.00181.x
Subject(s) - moral hazard , business , agency (philosophy) , ex ante , agency cost , cost–benefit analysis , private information retrieval , service (business) , finance , economics , microeconomics , incentive , marketing , computer science , computer security , corporate governance , ecology , philosophy , epistemology , biology , macroeconomics , shareholder
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.