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Imperfect Bundling in Public–Private Partnerships

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Listed:
  • David Martimort
  • Flavio Menezes
  • Myrna Wooders
  • LUCIANO GRECO

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.

Suggested Citation

  • David Martimort & Flavio Menezes & Myrna Wooders & LUCIANO GRECO, 2015. "Imperfect Bundling in Public–Private Partnerships," Journal of Public Economic Theory, Association for Public Economic Theory, vol. 17(1), pages 136-146, February.
    • Handle: RePEc:bla:jpbect:v:17:y:2015:i:1:p:136-146
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    Cited by:

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    2. Tharun Dolla & Boeing Laishram, 2019. "Bundling in public–private partnership projects – a conceptual framework," International Journal of Productivity and Performance Management, Emerald Group Publishing Limited, vol. 69(6), pages 1177-1203, December.
    3. Elisa Villani & Luciano Greco & Nelson Phillips, 2017. "Understanding Value Creation in Public-Private Partnerships: A Comparative Case Study," Journal of Management Studies, Wiley Blackwell, vol. 54(6), pages 876-905, September.
    4. Kusterer, David J. & Schmitz, Patrick W., 2020. "Public goods, property rights, and investment incentives: An experimental investigation," Journal of Economic Behavior & Organization, Elsevier, vol. 177(C), pages 514-532.
    5. Kosuke Oshima, 2016. "Public-Private Partnerships, Dividing Operational Stage, and Optimal Governance Structures," Public Organization Review, Springer, vol. 16(4), pages 443-459, December.
    6. Schmitz, Patrick W., 2023. "The proper scope of government reconsidered: Asymmetric information and incentive contracts," European Economic Review, Elsevier, vol. 157(C).
    7. Jarrod Ormiston & Richard Seymour, 2011. "Understanding Value Creation in Social Entrepreneurship: The Importance of Aligning Mission, Strategy and Impact Measurement," Journal of Social Entrepreneurship, Taylor & Francis Journals, vol. 2(2), pages 125-150, October.
    8. Mahavadi Dhanshyam & Samir K. Srivastava, 2021. "Governance structures for public infrastructure projects: Public–private management regimes, contractual forms and innovation," Construction Management and Economics, Taylor & Francis Journals, vol. 39(8), pages 652-668, August.
    9. Schmitz, Patrick W., 2017. "Incomplete contracts, shared ownership, and investment incentives," Journal of Economic Behavior & Organization, Elsevier, vol. 144(C), pages 153-165.
    10. Eva I. Hoppe & Patrick W. Schmitz, 2021. "How (Not) to Foster Innovations in Public Infrastructure Projects," Scandinavian Journal of Economics, Wiley Blackwell, vol. 123(1), pages 238-266, January.
    11. Elisa Villani & Luciano Greco & Nelson Phillips, 2015. "Business Models and Institutional Complexity: Understanding Value Creation in Healthcare Sector Public-Private Partnerships," BEMPS - Bozen Economics & Management Paper Series BEMPS31, Faculty of Economics and Management at the Free University of Bozen.
    12. Marco Buso & Luciano Greco, 2023. "The optimality of public–private partnerships under financial and fiscal constraints," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 32(4), pages 856-881, October.
    13. Marco Buso, 2014. "Public-Private Partnership: Information Externality in Sequential Investments," "Marco Fanno" Working Papers 0176, Dipartimento di Scienze Economiche "Marco Fanno".
    14. Deng, Zhongqi & Song, Shunfeng & Chen, Yongjun, 2016. "Private participation in infrastructure project and its impact on the project cost," China Economic Review, Elsevier, vol. 39(C), pages 63-76.

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    More about this item

    JEL classification:

    • D86 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Economics of Contract Law
    • L33 - Industrial Organization - - Nonprofit Organizations and Public Enterprise - - - Comparison of Public and Private Enterprise and Nonprofit Institutions; Privatization; Contracting Out
    • H11 - Public Economics - - Structure and Scope of Government - - - Structure and Scope of Government
    • H57 - Public Economics - - National Government Expenditures and Related Policies - - - Procurement

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