How to design infrastructure contracts in a warning world: a critical appraisal of public-private partnerships
David Martimort
(1, 2)
,
Stephane Straub
(3, 4, 5)
David Martimort
- Fonction : Auteur
- PersonId : 1043577
- ORCID : 0000-0002-4185-8703
- IdRef : 070009635
Stephane Straub
- Fonction : Auteur
- PersonId : 926482
Résumé
We analyze how long-term uncertainty, for example, regarding future climate conditions, affects the design of concession contracts and organizational forms in a principal–agent context, with dynamic moral hazard, limited liability, and irreversibility constraints. The prospect of future, uncertain productivity shocks on the returns on the firm's effort creates an option value of delaying efforts, a course that exacerbates agency costs. Contracts and organizational forms are drafted to control this cost of delegated flexibility. The possibility for the agent to delay investment in response to uncertainty and irreversibility also elicits preference for unbundling different stages of the project through short-term contracts. Our analysis is relevant to infrastructure sectors that are sensitive to changing weather conditions and sheds a pessimistic light on the relevance of public–private partnerships in this context.
Domaines
Economies et financesFormat du dépôt | Notice |
---|---|
Type de dépôt | Article dans une revue |
Titre |
en
How to design infrastructure contracts in a warning world: a critical appraisal of public-private partnerships
|
Résumé |
en
We analyze how long-term uncertainty, for example, regarding future climate conditions, affects the design of concession contracts and organizational forms in a principal–agent context, with dynamic moral hazard, limited liability, and irreversibility constraints. The prospect of future, uncertain productivity shocks on the returns on the firm's effort creates an option value of delaying efforts, a course that exacerbates agency costs. Contracts and organizational forms are drafted to control this cost of delegated flexibility. The possibility for the agent to delay investment in response to uncertainty and irreversibility also elicits preference for unbundling different stages of the project through short-term contracts. Our analysis is relevant to infrastructure sectors that are sensitive to changing weather conditions and sheds a pessimistic light on the relevance of public–private partnerships in this context.
|
Auteur(s) |
David Martimort
1, 2
, Stephane Straub
3, 4, 5
1
PSE -
Paris School of Economics
( 301309 )
- 48 boulevard Jourdan 75014 Paris
- France
2
PSE -
Paris-Jourdan Sciences Economiques
( 139754 )
- 48 boulevard Jourdan 75014 Paris
- France
3
ARQADE -
Atelier de Recherche Quantitative Appliquée au Développement Economique
( 35165 )
- France
4
IDEI -
Institut d'Economie Industrielle
( 199449 )
- Manufacture des Tabacs, Aile Jean-Jacques Laffont, 21 allée de Brienne 31015 Toulouse Cedex 6
- France
5
TSE-R -
Toulouse School of Economics
( 93477 )
- Manufacture de Tabacs, 21 allées de Brienne 31000 Toulouse
- France
|
Langue du document |
Anglais
|
Nom de la revue |
|
Vulgarisation |
Non
|
Comité de lecture |
Oui
|
Audience |
Internationale
|
Date de publication |
2016-02
|
Volume |
57
|
Numéro |
1
|
Page/Identifiant |
61–88
|
Domaine(s) |
|
Mots-clés |
en
concession contracts
|
DOI | 10.1111/iere.12148 |
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