Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/223630
Authors: 
Buso, Marco
Dosi, Cesare
Moretto, Michele
Year of Publication: 
2020
Series/Report no.: 
Working Paper No. 003.2020
Abstract: 
We study the effects of granting an exit option that enables the private party to early terminate a PPP project if it turns out to be financially loss-making. In a continuous-time setting with hidden information about operating profits, we show that an exit option, acting as a risk-sharing device, can soften agency problems and, in so doing, accelerate investment and increase the government's expected payoff, even while taking into account the costs that the public sector will have to meet in the future to take direct responsibility on service provision.
Subjects: 
Public Infrastructure Services
Public-Private Partnerships
Adverse Selection
Real Options
Early Termination Fees
JEL: 
D81
D82
D86
H54
Document Type: 
Working Paper

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