Eva I. Hoppe and Patrick W. Schmitz
RAND Journal of Economics, Vol. 44 (1), 2013, 56-74.
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, whereas under traditional procurement, these tasks are delegated to separate private contractors. The two provision modes differ in their incentives to innovate and to gather private information about future costs to adapt the service provision to changing circumstances. The government agency`s preferred mode of provision depends on the information gathering costs, the costs of innovation efforts, and on the degree to which effort is contractible.
The working paper version is available for download (CEPR Discussion Paper 7681).
Another working paper version is available for download at SSRN.
The paper is available for download.