Arm's Length Provision of Public Services

Publikation: Working paperForskning


  • 2007-12

    Forlagets udgivne version, 494 KB, PDF-dokument

We analyze the economic consequences of strategic delegation of the right to decide between public or private provision of governmental service and/or the authority to negotiate and renegotiate with the chosen service provider. Our model encompass both bureaucratic delegation from a government to a privatization agency and electoral delegation from voters to a government. We identify two powerfull effects of delegation when contracts are incomplete: The incentive effect increases the incentive part of service providers' remuneration and we show that strategic delegation may substitute formal incentive contracts. The bargaining effect improves the bargaining position vis a vis a private firm with market power and leads to a lower price for the service
UdgiverCentre for Industrial Economics, Department of Economics, University of Copenhagen
Antal sider44
StatusUdgivet - 2007

Bibliografisk note

JEL Classification: D72, L33, L97

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