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Imperfect Bundling in Public–Private Partnerships
Author(s) -
GRECO LUCIANO
Publication year - 2015
Publication title -
journal of public economic theory
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.809
H-Index - 32
eISSN - 1467-9779
pISSN - 1097-3923
DOI - 10.1111/jpet.12122
Subject(s) - imperfect , incentive , agency (philosophy) , corporate governance , microeconomics , government (linguistics) , economics , business , scope (computer science) , profit (economics) , public economics , private sector , industrial organization , finance , computer science , philosophy , linguistics , epistemology , programming language , economic growth
Abstract We provide a first contribution to analyze how agency problems within the private consortium (i.e., imperfect bundling of private tasks) affect the performance of public–private partnerships (PPPs). When both public–private and private–private contracts are incomplete, the profit‐sharing rules are key to regulate private partners' incentives. In failing to consider the role of imperfect bundling, the scope for PPPs may be overrated (or underrated) if the social benefits of infrastructure quality are large (or small) as compared to the social cost of operation efficiency. Also, it may be optimal for the government to restrict the admissible governance of private consortia.