How to Design Infrastructure Contracts in a Warming World? A Critical Appraisal of Public-Private Partnerships

Martimort, David and Straub, Stéphane (2016) How to Design Infrastructure Contracts in a Warming World? A Critical Appraisal of Public-Private Partnerships. International Economic Review, vol. 57 (n° 1). pp. 61-88.

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Official URL: http://tse-fr.eu/pub/28618

Abstract

We analyze how uncertainty regarding future climate conditions affects the design of concession contracts, organizational forms and technological choices in a principal-agent context with dynamic moral hazard, limited liability and irreversibility constraints. The prospect of future, uncertain productivity shocks on the returns on the firm’s effort creates an option value of delaying efforts which exacerbates agency costs. Contracts and organizational forms are drafted to control this cost of delegated flexibility. Our analysis is relevant for infrastructure sectors that are sensitive to changing weather conditions and sheds a pessimistic light on the relevance of Public-Private Partnerships in this context.

Item Type: Article
Language: English
Date: February 2016
Refereed: Yes
JEL codes: D82 - Asymmetric and Private Information
L32 - Public Enterprises
Q54 - Climate; Natural Disasters
Subjects: B- ECONOMIE ET FINANCE
Divisions: TSE-R (Toulouse)
Site: UT1
Date Deposited: 16 Mar 2015 14:51
Last Modified: 07 Mar 2018 13:23
OAI ID: oai:tse-fr.eu:28618
URI: http://publications.ut-capitole.fr/id/eprint/16607

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