TITLE:
Research on Public Private Partnerships with Privately Informed Local Governments
AUTHORS:
Xiao Feng
KEYWORDS:
Private Public Partnerships, Signaling Game, Moral Hazard
JOURNAL NAME:
Open Journal of Social Sciences,
Vol.4 No.4,
April
21,
2016
ABSTRACT: Based on the signaling model, this article analyzes the public private partnership contracts be-tween local governments privately informed about the quality of the project and the private sector hired to run projects. On the one hand, the local governments know more details about features of the PPP project (such as possibility that the project will be shut down by some unfavorable policy factors in the future); on the other hand, the effort undertook by private sector in building period is uncontractable. Our results show that the local governments may design a contract which signals the quality of the project. The signaling contract, however, will reduce the agent’s incentives, and create a trade-off between signaling and high-powered incentive.