Working Paper: CEPR ID: DP10686
Authors: Patrick W. Schmitz
Abstract: The government and a non-governmental organization (NGO) can invest in the provision of a public good. Who should be the owner of the public project? In an incomplete contracting model in which ex post negotiations are without frictions, the party that values the public good most should be the owner, regardless of technological aspects. However, under the plausible assumption that there are bargaining frictions, the optimal ownership structure depends on technological aspects and on the parties' valuations. We show that the differences between incomplete contracting models with public goods and private goods are thus smaller than has previously been thought.
Keywords: Bargaining Frictions; Incomplete Contracts; Investment Incentives; Ownership; Public Goods
JEL Codes: C78; D23; D86; H41; L31
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| bargaining frictions (J52) | optimal ownership structure of public goods (H44) |
| technological advantages (O33) | optimal ownership structure of public goods (H44) |
| party valuations (D46) | optimal ownership structure of public goods (H44) |
| bargaining frictions (J52) | investment incentives (O31) |
| optimal ownership structure of public goods (H44) | expected payoffs at date 2 (G19) |
| frictions (D74) | total surplus (D46) |