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 language | English |
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Journal | Journal of Economics and Management Strategy |
DOIs | |
Publication status | Published - 2021 |
Externally published | Yes |
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