Arm's Length Provision of Public Services
Publikation: Working paper › Forskning
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Arm's Length Provision of Public Services. / Bennedsen, Morten; Schultz, Christian.
Centre for Industrial Economics, Department of Economics, University of Copenhagen, 2007.Publikation: Working paper › Forskning
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TY - UNPB
T1 - Arm's Length Provision of Public Services
AU - Bennedsen, Morten
AU - Schultz, Christian
N1 - JEL Classification: D72, L33, L97
PY - 2007
Y1 - 2007
N2 - 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
AB - 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
KW - Faculty of Social Sciences
KW - outsourcing
KW - strategic delegation
KW - incentives
KW - incomplete contracting
KW - market power
M3 - Working paper
BT - Arm's Length Provision of Public Services
PB - Centre for Industrial Economics, Department of Economics, University of Copenhagen
ER -
ID: 1632730