Arm's length provision of public services

Arbeitspapier

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.

Object Details

• Language: Englisch

References and Relationships

• Bibliographic citation: Series: CESifo Working Paper ; No. 2161

Classification and Topics

• Classification: Wirtschaft ; Political Processes: Rent-seeking, Lobbying, Elections, Legislatures, and Voting Behavior ; Comparison of Public and Private Enterprises and Nonprofit Institutions; Privatization; Contracting Out ; Utilities: General
• Subject: outsourcing ; strategic delegation ; incentives ; incomplete contracting ; market power ; representative democracy ; Öffentliche Dienstleistung ; Privatwirtschaft ; Öffentlicher Sektor ; Marktmacht ; Demokratie ; Ökonomischer Anreiz ; Theorie

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): Bennedsen, Morten ; Schultz, Christian
• Event: Veröffentlichung
• (who): Center for Economic Studies and ifo Institute (CESifo)
• (where): Munich
• (when): 2007

Further information

• Handle: http://hdl.handle.net/10419/26205
• Last update: 10.03.2025, 11:45 AM CET