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To allot or not to allot public services in Europe? An incomplete contract approach

Numéro: 2011-7

To allot or not to allot public services in Europe? An incomplete contract approach
Julie De Brux and Claudine Desrieux
Abstract: Using an incomplete contract framework, we analyze the consequences of allotment in public procurement, which has been introduced by the European Directive 2004/18/EC.
We evaluate the impacts both on price and quality of public services provided under public procurement. Our results show that when the quality of the service depend on non-contractible efforts made by the operators, allotment does not maximize the joint payoffs of the public and private parties (i.e. the total surplus), but mainly benefits to public authorities.

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