Big Data

Towards A Principal-Agent Based Typology Of Risks In Public-Private Partnerships

Date Added: Aug 2009
Format: PDF

There is a strong economic rationale for close cooperation between the public and private sectors. This has resulted in a significant increase in the demand for the provision of public services through instruments combining public and private money such as public-private partnerships (PPPs or P3s). The author describes these arrangements and explores how they can be analyzed using standard tools in economics (incentives and principal-agent theory) and discusses the implications of the approach in terms of identifying risks that are often overlooked before turning to the optimal risk-sharing between the public and private partners, in particular with respect to information asymmetries in risk perceptions.