Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/208539 
Year of Publication: 
2008
Series/Report no.: 
Working paper No. 7-2007
Publisher: 
Copenhagen Business School (CBS), Department of Economics, Frederiksberg
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. Outsourcing, Strategic Delegation, Incentives, Incomplete Contracting, Market Power, Representative Democracy.
Persistent Identifier of the first edition: 
Creative Commons License: 
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Document Type: 
Working Paper

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