Assigning Tasks In Public Infrastructure Projects: Specialized Private Agents Or Public Private Partnerships?

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Executive Summary

How should the different tasks in an infrastructure project be allocated to private and public agents, respectively? Traditionally, building the physical asset is assigned to private partners whereas financing and operation are carried out by the public sector. But even if building, operation, and possibly financing are delegated to the private sector, the question remains whether all these tasks should be accomplished by a single private agent in the form of a Public Private Partnership (PPP) or assigned to independent firms. To analyze this problem the authors apply an incomplete contracts approach and consider both informational asymmetries and investment incentives.

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