Government Outsourcing

Public Contracting with Private Monopoly

Bibliographic Data

ID9703095
AuthorsEmmanuelle Auriol (0000-0003-2261-8736, TSE (ARQADE and IDEI), Université de Toulouse I), Pierre M Picard (0000-0003-1882-8722, CREA, University of Luxembourg, and CORE, Université catholique de Louvain)
Year2009
Volume119
Issue540
Pages1464-1493
Publication date2009-10-01
Peer ReviewedYes
Open AccessYes
TypeARTICLE
VenueThe Economic Journal (JOURNAL)
Journal identifiersISSN: 0013-0133 • E-ISSN: 1468-0297
PublisherOxford University Press (OUP) (PUBLISHER)
DOI10.1111/j.1468-0297.2009.02291.x
OpenAlexW2144492880
LanguageEN
Citations received4
References cited25

The article studies the impact of the government budget constraint on the regulation of natural monopolies in adverse selection contexts. The government maximises total surplus but incurs some cost of public funds à la Laffont and Tirole (1993). Government outsourcing is proposed as an alternative to regulation in which firms freely enter the market and choose their prices and output levels. However government can contract ex post with the private firms. This ex post contracting set-up allows more flexibility than regulation where governments commit to both investment and operation cash-flows. This is especially relevant in case of high technological uncertainties

Adverse selection · Budget constraint · Business · Commit · Constraint (computer-aided design · Economics · Ex-ante · Flexibility (engineering · Government (linguistics · Industrial organization · Investment (military · Market economy · Microeconomics · Monopoly · Natural monopoly · Outsourcing · Public economics · Subsidy · Auction Theory and Applications · Finance · Public Procurement and Policy · Public-Private Partnership Projects

Tools

Open DOISci-Hub