We would like to thank the editor, David Martimort, and two anonymous referees for valuable comments and suggestions that have helped us to substantially improve our article. Moreover, we have benefited from useful discussions with participants of the CEPR Conference “The Role of Incentives, Information and the Private Sector in the Delivery of Public Services” in Brussels (2009), the conference “The Economics of Infrastructure in a Globalised World: Issues, Lessons and Future Challenges” in Sydney (2010), the conference “Contracts, Procurement and Public-Private Agreements” at the Sorbonne University in Paris (2010), the ISNIE Conference in Stanford (2011), the WEAI Conference in San Diego (2011), the EARIE Conference in Stockholm (2011), and the CEPR Conference “Public Procurement and Sustainable Growth” in Venice (2011).
Public-private partnerships versus traditional procurement: Innovation incentives and information gathering
Article first published online: 5 APR 2013
Copyright © 2013, RAND.
The RAND Journal of Economics
Volume 44, Issue 1, pages 56–74, Spring 2013
How to Cite
Hoppe, E. I. and Schmitz, P. W. (2013), Public-private partnerships versus traditional procurement: Innovation incentives and information gathering. The RAND Journal of Economics, 44: 56–74. doi: 10.1111/1756-2171.12010
- Issue published online: 5 APR 2013
- Article first published online: 5 APR 2013
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 the degree to which effort is contractible.