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Uncertainty, renegociation and incentives in public private partnerships. An economic analysis of worldwide toll road concessions

Abstract : The aim of this thesis is to contribute to a better understanding of Public Private Partnerships (PPPs). These agreements between a public agency and a private sector entity have been hallowed as a “third way” between public provision and privatization for public-service delivery. Yet the results that PPPs have produced around the world so far are mixed. The theoretical literature on this topic has pointed out that PPPs, as long-term contracts, are characterized by high uncertainty, which inevitably creates the need for ex post unanticipated service adaptation. This feature has two prejudicial consequences on the efficiency of PPPs: first, when specific investments are involved, renegotiations leave room for eventual opportunistic behaviour, from both the public and the private partner. Second, renegotiations generate inefficiencies to the extent that hold-ups lead to inefficient ex ante decisions. In this context, the contributions of my thesis are the following ones: First I empirically show, using an original dataset on the bidding behaviour of private firms in worldwide toll road auctions, that uncertainty and opportunistic renegotiations are in fact major issues associated with
PPPs, so far assumed by the literature. Second, I theoretically – with a model combining transaction cost and incomplete contract theories – and empirically show that these issues can be tackled through the tradeoff between contractual flexibility and rigidity. Third, I theoretically show that contracts where firms bear little or no demand risk, considered as an optimal solution to these issues, introduce distorted incentives for public authorities to be responsive to consumers' preferences.
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Submitted on : Wednesday, January 30, 2008 - 1:54:35 PM
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Laure Athias. Uncertainty, renegociation and incentives in public private partnerships. An economic analysis of worldwide toll road concessions. Economics and Finance. Université Panthéon-Sorbonne - Paris I, 2007. English. ⟨tel-00226000⟩

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