A Theory of BOT Concession Contracts

Auriol, Emmanuelle and Picard, Pierre M. (2013) A Theory of BOT Concession Contracts. Journal of Economic Behavior and Organization, 89. pp. 187-209.

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Official URL: http://tse-fr.eu/pub/25116

Abstract

In this paper, we discuss the choice for build-operate-and-transfer (BOT) concessions when governments and firm managers do not share the same information regarding the operation characteristics of a facility. We show that larger shadow costs of public funds and larger information asymmetries entice governments to choose BOT concessions. This result stems from a trade-off between the government’s shadow costs of financing the construction and the operation of the facility and the excessive usage price that the consumer may face during the concession period. The incentives to choose BOT concessions increase as a function of ex-ante informational asymmetries between governments and potential BOT concession holders and with the possibility of transferring the concession cost characteristics to public firms at the termination of the concession.

Item Type: Article
Language: English
Date: 2013
Refereed: Yes
Uncontrolled Keywords: Public-private-partnership, privatization, adverse selection, regulation, natural monopoly, infrastructure, facilities
JEL codes: D83 - Search; Learning; Information and Knowledge; Communication; Belief
L33 - Comparison of Public and Private Enterprises; Privatization; Contracting Out
L43 - Legal Monopolies and Regulation or Deregulation
L51 - Economics of Regulation
Subjects: B- ECONOMIE ET FINANCE
Divisions: TSE-R (Toulouse)
Site: UT1
Date Deposited: 09 Jul 2014 17:21
Last Modified: 06 Apr 2018 09:47
OAI ID: oai:tse-fr.eu:25116
URI: http://publications.ut-capitole.fr/id/eprint/15157

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