The Hold-Up Problem in Government Contracting

Bös, Dieter; Lülfesmann, Christoph

doi:10.2307/3440580

Cited by 22 publications

(19 citation statements)

References 8 publications

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“…Hence it is easier to outsource cleaning services to the private sector than for instance wastewater treatment plants or the military (Mühlenkamp 2006: 45). Now in the relevant literature, which goes on the premise of profit-oriented private contract partners, it has emerged that specific investments can basically be collateralised by certain types of contracts so that a hierarchy is not necessarily needed in order to guarantee specific investments and defend against holdups (Bös 2001;Bös/Lülfesmann 1996). Translated to public tasks this result seems at a glance to imply that the activation of private enterprises to fulfil public tasks represents a correspondingly solvable contractual problem.…”

Section: Transaction Costs Relationship-specific Capital and Efficiementioning

confidence: 99%

“…Translated to public tasks this result seems at a glance to imply that the activation of private enterprises to fulfil public tasks represents a correspondingly solvable contractual problem. However as long as the public authorities are committed to maximising welfare rather than making profits, they have less room to negotiate/act than private enterprises with the result that under certain circumstancesunlike between profit-maximizing contract partners -they are not in a position to conclude an efficient contract (Bös/Lülfesmann 2001).…”

Section: Transaction Costs Relationship-specific Capital and Efficiementioning

confidence: 99%

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Political drivers of and barriers to Public-Private Partnerships – The role of political involvement

Gawel¹

2017

ZögU

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Standard-Nutzungsbedingungen:Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Zwecken und zum Privatgebrauch gespeichert und kopiert werden.Sie dürfen die Dokumente nicht für öffentliche oder kommerzielle Zwecke vervielfältigen, öffentlich ausstellen, öffentlich zugänglich machen, vertreiben oder anderweitig nutzen.Sofern die Verfasser die Dokumente unter Open-Content-Lizenzen (insbesondere CC-Lizenzen) zur Verfügung gestellt haben sollten, gelten abweichend von diesen Nutzungsbedingungen die in der dort genannten Lizenz gewährten Nutzungsrechte. Abstract: The application and design of public-private partnerships between the extremes of purely public or purely private task fulfilment in public services is, in practice, subject to political processes. Decisions about PPPs (realisation, arrangement) are taken in the political arena and are therefore not theoretical optimisation exercises. The interests and resources of the actors who participate in the political decision-making process as well as the rules of the political process have a powerful influence on whether, in what areas, and in what form PPPs are realised. The distance between this output and solutions that are theoretically desirable given certain ideal goals (e.g. efficiency) and conditions can be referred to as political bias. So what role does the political process play in the realisation of PPPs, in the actual design of PPPs, and in their performance? Using public choice and institutional economics theory this paper analyses what chances of success PPPs have given the existing decision-making structures and the inherent incentives for participating actors, and in what way political influence is brought to bear in the first place. Furthermore, aspects of political science in this field (legitimacy, democratic control) are considered as well. Using PPPs there might be a trade-off between reduced democratic control, but also reinforced market control. It turns out that political involvement might be both an important driver as well as an obstacle for (efficient) PPPs and that it is likely to decrease efficiency either way. A case study for userfinancing PPPs in the transport sector highlights the problems of political renitency. Terms of use: Documents in

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Section: Transaction Costs Relationship-specific Capital and Efficiementioning

confidence: 99%

Section: Transaction Costs Relationship-specific Capital and Efficiementioning

confidence: 99%

Political drivers of and barriers to Public-Private Partnerships – The role of political involvement

Gawel¹

2017

ZögU

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“…250-254. 2 The assumption of a budget-maximizing procurement agency is in contrast to several other incomplete-contract models on public procurement, for instance Bös and Lülfesmann (1996) and Bös (2000), which assume a welfare-maximizing procurement agency.…”

Section: Introductionmentioning

confidence: 96%

“…Since the agency wants to spend as many dollars as possible, it fully extracts the parliament's willingness to pay: the agency makes a take-it-or-leave-it offer to the parliament which equates the budget to the parliament's social evaluation of the project. (This take-it-or-leave-it-offer is the core of 10 For the use of such a preference function see also Bös and Lülfesmann (1996). A precise formulation of the government agency's utility function would be as follows: one must define P = P (x, y), where x denotes the level of allocative efficiency and y the payments to the procurement agency.…”

Section: The Interplay Between Parliament and Procurement Agencymentioning

confidence: 99%

Bureaucrats and Public Procurement

Bös

2002

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This paper deals with a Niskanen type of public-procurement agency. It is shown that the procurement game should be separated into an investment game and a project game, the first game to be played before nature determines the actual realizations of benefit and costs of the project, the second game to be played afterward. In the first game the relationship-specific investments of agency and seller are determined, in the second game the decision on the production of the project is taken. In contrast to many other incomplete-contract papers, in our Niskanen setting it is meaningless to write one and only one contract which refers to both investment and production. Welfare-optimal procurement of the project can be attained under relatively weak assumptions; welfare-optimal investments of the seller (and only of the seller) may result under special circumstances; welfare-optimal investments of both agency and seller cannot be reached.

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“…This is the reason why competition and regulation policies are generally delegated to independent agencies and the surrounding rules interpreted as constitutional enactments, whose modification requires strong majorities. A « committed » government ensures against « regulatory » hold-up (Bös and Lulfesmann, 1996), but may then undermine efficient adaptation when needed (as it is the case of the recent revision at the EU level of antitrust rules applicable to State aids, after the financial crisis). On the contrary, a low level of commitment generates uncertainty over the « rules of the game », and may undermine proper incentives particularly to invest.…”

Section: Centralization Vs Decentralizationmentioning

confidence: 99%

How to design institutional frameworks for markets

Brousseau¹,

Nicita²

2010

rei

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The key role of institutions for economic performance has recently been acknowledged in the economic policy debate. This paper aims at pointing out the main policy lessons and the recommendations to be drawn from New Institutional Economics (NIE), when considering the organization of markets. We examine, first, the domains – namely the establishment of property rights, the management of externalities and the maintenance of the competitive process – on which NIE identifies the potential impact of institutional tools on market performance. Second, we highlight the tradeoffs identified in the literature regarding the organization of an institutional system. This leads us to consider the respective virtues and drawbacks of hierarchical vs. transactional, public vs. private, centralized vs. decentralized and formal vs. informal ordering. Finally, we conclude by showing how NIE draws attention to the difficulties faced by political or economic decision-makers when they attempt to enhance market efficiency by reforming institutional frameworks.

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The Hold-Up Problem in Government Contracting

Cited by 22 publications

References 8 publications

Political drivers of and barriers to Public-Private Partnerships – The role of political involvement

Political drivers of and barriers to Public-Private Partnerships – The role of political involvement

Bureaucrats and Public Procurement

How to design institutional frameworks for markets

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