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ifo Institut – Leibniz-Institut für Wirtschaftsforschung an der Universität München >
CESifo Working Papers, CESifo Group Munich >
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http://hdl.handle.net/10419/26205
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| Title: | | Arm's length provision of public services  |
| Authors: | | Bennedsen, Morten Schultz, Christian |
| Issue Date: | | 2007 |
| Series/Report no.: | | CESifo working paper 2161 |
| Abstract: | | 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. |
| Subjects: | | outsourcing strategic delegation incentives incomplete contracting market power representative democracy |
| JEL: | | D72 L33 L97 |
| Document Type: | | Working Paper |
| Appears in Collections: | | CESifo Working Papers, CESifo Group Munich
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