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Public-private partnerships: Task interdependence and contractibility

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  • Chen, Bin R.
  • Chiu, Y. Stephen

Abstract

We examine the proper scope of public-private partnerships in the context of a project consisting of two tasks, building and operation of a facility. We investigate the optimal arrangement regarding bundling versus unbundling and private ownership versus public ownership. Like Bennett and Iossa (2006), we assume that the innovative activity in the building stage has impacts on, among other things, the subsequent operational cost. We relax the nature of task interdependence and study different contractual frameworks. The general insight is that given limitations in contractibility, contrary to common sense, complementarity between tasks favors unbundling over bundling.

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  • Chen, Bin R. & Chiu, Y. Stephen, 2010. "Public-private partnerships: Task interdependence and contractibility," International Journal of Industrial Organization, Elsevier, vol. 28(6), pages 591-603, November.
    • Handle: RePEc:eee:indorg:v:28:y:2010:i:6:p:591-603
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    1. David Martimort & Flavio Menezes & Myrna Wooders & ELISABETTA IOSSA & DAVID MARTIMORT, 2015. "The Simple Microeconomics of Public-Private Partnerships," Journal of Public Economic Theory, Association for Public Economic Theory, vol. 17(1), pages 4-48, February.
    2. Shiying Shi & Fangfang Zhao & Han Zhang & Hujun Li & Xiaosu Ye, 2023. "Research on the Influences of Task Interdependence on Team Performance in the Context of the Leader–Member Exchange Differentiation in the Public–Private Partnership Projects," Sustainability, MDPI, vol. 15(18), pages 1-25, September.
    3. Ehtisham Ahmad & Annalisa Vinella & Kezhou Xiao, 2018. "Contracting arrangements and public private partnerships for sustainable development," Public Sector Economics, Institute of Public Finance, vol. 42(2), pages 145-169.
    4. Schmitz, Patrick W., 2015. "Government versus private ownership of public goods: The role of bargaining frictions," Journal of Public Economics, Elsevier, vol. 132(C), pages 23-31.
    5. Hoppe, Eva I. & Kusterer, David J. & Schmitz, Patrick W., 2013. "Public–private partnerships versus traditional procurement: An experimental investigation," Journal of Economic Behavior & Organization, Elsevier, vol. 89(C), pages 145-166.
    6. 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.
    7. Benedetto Manganelli & Sabina Tataranna & Marco Vona & Francesco Paolo Del Giudice, 2022. "An Innovative Approach for the Enhancement of Public Real Estate Assets," Sustainability, MDPI, vol. 14(14), pages 1-14, July.
    8. Dmitri Vinogradov & Elena Shadrina, 2018. "Public-Private Partnerships as Collaborative Projects: Testing the Theory on Cases from EU and Russia," International Journal of Public Administration, Taylor & Francis Journals, vol. 41(5-6), pages 446-459, April.
    9. Bin R. Chen & Y. Stephen Chiu, 2014. "Task Interdependence and Noncontractibility in Public-Good Provision," Journal of Institutional and Theoretical Economics (JITE), Mohr Siebeck, Tübingen, vol. 170(4), pages 731-748, December.
    10. Eva I. Hoppe & Patrick W. Schmitz, 2013. "Public-private partnerships versus traditional procurement: Innovation incentives and information gathering," RAND Journal of Economics, RAND Corporation, vol. 44(1), pages 56-74, March.
    11. Benedetto Manganelli & Francesco Tajani, 2014. "Optimised management for the development of extraordinary public properties," Journal of Property Investment & Finance, Emerald Group Publishing Limited, vol. 32(2), pages 187-201, February.
    12. Kosuke Oshima, 2016. "Public-Private Partnerships, Dividing Operational Stage, and Optimal Governance Structures," Public Organization Review, Springer, vol. 16(4), pages 443-459, December.
    13. Schmitz, Patrick W., 2013. "Job design with conflicting tasks reconsidered," European Economic Review, Elsevier, vol. 57(C), pages 108-117.
    14. Halonen-Akatwijuka, Maija, 2012. "Nature of human capital, technology and ownership of public goods," Journal of Public Economics, Elsevier, vol. 96(11), pages 939-945.
    15. Ram Singh, 2018. "Public–private partnerships vs. traditional contracts for highways," Indian Economic Review, Springer, vol. 53(1), pages 29-63, December.
    16. Maxim Mai & Vladimir Smirnov & Andrew Wait, 2014. "Ownership, Access, and Sequential Investment," Canadian Journal of Economics/Revue canadienne d'économique, John Wiley & Sons, vol. 47(1), pages 203-231, February.
    17. Schmitz, Patrick W., 2010. "Should a principal hire one agent or two agents to perform two sequential tasks?," CEPR Discussion Papers 7976, C.E.P.R. Discussion Papers.
    18. Schmitz, Patrick W., 2013. "Public procurement in times of crisis: The bundling decision reconsidered," Economics Letters, Elsevier, vol. 121(3), pages 533-536.
    19. Antonio García-Lorenzo, 2014. "Cooperación público-privada en la prestación de servicios públicos: el conflicto entre la flexibilidad y la incertidumbre," SERMED 2014 Conference Papers p08, Instituto Universitario de Análisis Económico y Social.
    20. Li, Sanxi & Sun, Hailin & Yan, Jianye & Yu, Jun, 2015. "Bundling decisions in procurement auctions with sequential tasks," Journal of Public Economics, Elsevier, vol. 128(C), pages 96-106.

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