Government Outsourcing: Public Contracting with Private Monopoly

By E. Auriol, Pierre Picard. Social Science Research Network, 2009

116 citations recorded by the source corpus.

The paper studies the impact of government budget constraint in a pure adverse selection problem of monopoly regulation. The government maximizes total surplus but incurs some cost of public funds a la Laffont and Tirole (1993). An alternative to regulation is proposed in which firms are free to enter the market and to choose their price and output levels. However the government can contract ex-post with the private firms. This ex-post contracting set-up allows more flexibility than traditional regulation where governments commit to both investment and operation cash-flows. This is especially relevant in case of high technological uncertainties.

Subfields: Management Science and Operations Research, Strategy and Management

View Paper: https://www.semanticscholar.org/paper/d1539890678be00f1960b302f5f30ec960ae3e1f

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In Strategy and Management

1. Pierre Picard
2. E. Auriol

Citations in the corpus

• A Theory of BOT Concession Contracts (2013, background): “As a result we can conclude that the BOT project is preferred for large enough λ. Note secondly that when λ = 0, Qp → Q∗ and inequality (19) reduces to E [W (Q∗, β)] > E [W (Qm, β)] which is always true.”