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Government Opportunism in Public‐Private Partnerships

Author

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  • Vanessa Valero

    (EUI - European University Institute - Institut Universitaire Européen)

Abstract

This paper analyzes the contracting out of public services through public-private partnerships (PPP) subject to government opportunism. In PPP, the building of public infrastructure and the provision of related services are procured through only one contract. On the one hand, such bundling of tasks provides incentives to invest in the infrastructure to minimize the cost of providing public services over the long term. On the other hand, it creates incentives for the government to behave opportunistically, by not respecting the terms of the long-term contractual agreement. Contrarily, in the traditional procurement (TP), the public service provision tasks are contracted out separately. The purpose of this paper is two fold. First, we show that government commitment not to engage in opportunistic behavior is the key factor determining the cost efficiency of PPP. Second, we specify the economic determinants of government's choice between PPP and TP under government opportunism.

Suggested Citation

  • Vanessa Valero, 2015. "Government Opportunism in Public‐Private Partnerships," Post-Print hal-04739417, HAL.
    • Handle: RePEc:hal:journl:hal-04739417
    DOI: 10.1111/jpet.12105
    Note: View the original document on HAL open archive server: https://hal.science/hal-04739417v1
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    References listed on IDEAS

    as
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    2. Holmstrom, Bengt & Milgrom, Paul, 1991. "Multitask Principal-Agent Analyses: Incentive Contracts, Asset Ownership, and Job Design," The Journal of Law, Economics, and Organization, Oxford University Press, vol. 7(0), pages 24-52, Special I.
    3. Fudenberg, Drew & Tirole, Jean, 1990. "Moral Hazard and Renegotiation in Agency Contracts," Econometrica, Econometric Society, vol. 58(6), pages 1279-1319, November.
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