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

Marco Buso, Cesare Dosi, Michele Moretto

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
Pages (from-to)-
JournalJOURNAL OF ECONOMICS & MANAGEMENT STRATEGY
DOIs
Publication statusPublished - 2021

Keywords

  • Public Infrastructure Services
  • Public-Private Partnerships

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