Working Paper: CEPR ID: DP7681
Authors: Eva I. Hoppe; Patrick W. Schmitz
Abstract: A government agency wants a facility to be built and managed to provide a public service. Two different modes of provision are considered. In a public-private partnership, the tasks of building and managing are bundled, while under traditional procurement, these tasks are delegated to separate private contractors. The two modes differ in their incentives to innovate and to gather private information about future costs to adapt the service provision to changing circumstances. Depending on the potential benefits of such adaptations, the government agency's preferred mode of provision may be different from the one that should be chosen from a welfare perspective.
Keywords: Incomplete Contracts; Information Gathering; Integration versus Separation; Public-Private Partnerships
JEL Codes: D86; H11; L33
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| bundling of tasks in a PPP (H44) | increased innovation (O35) |
| government's mode of provision choice (PPP) (H44) | welfare outcomes (I38) |
| information asymmetry (D82) | potential inefficiencies in service delivery (L87) |