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Imperfect Bundling in Public‐Private Partnerships

Journal of Public Economic Theory

Published online on

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 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. This article is protected by copyright. All rights reserved.