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Review of Industrial Organization

, Volume 29, Issue 1–2, pp 75–92 | Cite as

Delegation of Contracting in the Private Provision of Public Services

  • John Bennett
  • Elisabetta IossaEmail author
Article

Abstract

We use an incomplete-contract approach to compare contracting out by a public sector agency with the delegation of contracting out to a public-private partnership (PPP) that is a joint venture between private and public sector agents. The PPP maximizes a linear combination of profit and social benefit. Such delegation may be desirable to curb innovations that reduce the cost of provision but also reduce social benefit. Delegation may be undesirable for innovations that increase social benefit but also raise costs. Our results are explained in terms of the shadow cost of public funds and the negotiating stance of the PPP.

Keywords

delegation Private Finance Initiative public private partnership public service provision 

JEL Classifications

H11 L33 

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Copyright information

© Springer 2006

Authors and Affiliations

  1. 1.Centre for Economic Development and InstitutionsBrunel UniversityUxbridgeUK
  2. 2.Brunel Business SchoolBrunel UniversityUxbridgeUK
  3. 3.The Centre for Market and Public Organisation, Bristol Institute of Public AffairsUniversity of BristolBristolUK

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