Do exit options increase the value for money of public–private partnerships?

Marco Buso*, Cesare Dosi, Michele Moretto

*Corresponding author

Research output: Contribution to journalArticle

Abstract

We study the effects of granting an exit option allowing the private party to terminate a Public–Private Partnerships contract early if it turns out to be loss-making. In a continuous-time setting with hidden information about the private returns on investment, we show that an exit option, acting as a risk-sharing device, can soften agency problems and, in so doing, spur investment and increase the government's expected payoff, even while taking into account the costs that the public sector will have to meet in the future to resume the project.
Original languageEnglish
JournalJournal of Economics and Management Strategy
DOIs
Publication statusPublished - 2021
Externally publishedYes

All Science Journal Classification (ASJC) codes

  • General Business,Management and Accounting
  • Economics and Econometrics
  • Strategy and Management
  • Management of Technology and Innovation

Keywords

  • Public Infrastructure Services
  • Public-Private Partnerships

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