November 16, 2016 Alexandre Mayol Paris School of Economics

Alexandre Mayol, Benjamin Michallet and Antoine Prévet

(Paris School of Economics)

« Providing Public Utilities in Common Agency Framework: Making, Buying and Level of Integration »

Date
Wednesday, 16th of November, 2016
6:30 p.m. to 8 p.m.

Location
IAE de Paris – 8 bis rue de la Croix-Jarry, 75013
Room A4

Speakers
Alexandre Mayol (Paris School of Economics, University Paris 1 Panthéon Sorbonne)
Antoine Prévet (Paris School of Economics, University Paris 1 Panthéon Sorbonne)

Paper 
« Providing Public Utilities in Common Agency Framework: Making, Buying and Level of Integration »

Authors
Alexandre Mayol (PSE, University Paris 1 Panthéon Sorbonne)
Benjamin Michallet (PSE, University Paris 1 Panthéon Sorbonne)
Antoine Prévet (PSE, University Paris 1 Panthéon Sorbonne)

Abstract: Most of the literature on public procurement investigates private sector efficiency versus public management in a principal-agent setting. This paper disentangles the relationship between the organizational forms of the principal and public good delivery efficiency. We use a Principal-Agent model based on LEN-Model. We apply this framework to a common agency problem and derive three levels of integration : Low, Medium and High. We model two types of organization namely private and public. We compare the price of water between the different levels of integration and types of organization ; and we give a theoretical background to the Principal’s choice among them. Using data from 15000 French drinking water providers, we test these theoretical propositions by benchmarking the combinations between public/private and the three levels of integration. Our results suggest that the level of integration explains the largest variations in the prices. Such specification makes vanishing main  theoretical and empirical results from previous literature: there is no difference between public/private providing in the lowest form of integration (municipal). When one considers the relative efficiency between public and private providing the middle form of integration is the less efficient.