The theory of incentives applied to the transport sector

Building upon Iossa and Martimort (2008), we study the main incentive issues and the form of optimal contracts for Public Private Partnerships (PPPs) in transports. We present a basic model of procurement in a multitask environment in which a risk-averse firm chooses unobservable efforts in infrastructure and service quality. We begin by analyzing the effect on incentives and risk transfer of bundling building and operation into a single contract. We consider the factors that affect the optimal allocation of demand risk and their implications for the choice of contract length. We discuss the dynamics of PPP contracts and how the risk of regulatory opportunism affects contract design and incentives

Procurement in infrastructure : what does theory tell us ?

Infrastructure has particular challenges in public procurement, because it is highly complex and customized and often requires economic, political and social considerations from a long time horizon. To deliver public infrastructure services to citizens or taxpayers, there are a series of decisions that governments have to make. The paper provides a minimum package of important economic theories that could guide governments to wise decision-making at each stage. Theory suggests that in general it would be a good option to contract out infrastructure to the private sector under high-powered incentive mechanisms, such as fixed-price contracts. However, this holds under certain conditions. Theory also shows that ownership should be aligned with the ultimate responsibility for or objective of infrastructure provision. Public and private ownership have different advantages and can deal with different problems. It is also shown that it would be a better option to integrate more than one public task (for example, investment and operation) into the same ownership, whether public or private, if they exhibit positive externalities.Public Sector Economics&Finance,Debt Markets,Infrastructure Economics,Contract Law,Transport Economics Policy&Planning

A legacy handbook for enterprise

Legacy Handbook reviewing emda's experience of enterprise activity. Identifies key achievements and draws out lessons learned that may be relevant to successor bodies active in this area

Crowd-sourcing with uncertain quality - an auction approach

This article addresses two important issues in crowd-sourcing: ex ante uncertainty about the quality and cost of different workers and strategic behaviour. We present a novel multi-dimensional auction that incentivises the workers to make partial enquiry into the task and to honestly report quality-cost estimates based on which the crowd-sourcer can choose the worker that offers the best value for money. The mechanism extends second score auction design to settings where the quality is uncertain and it provides incentives to both collect information and deliver desired qualities

A legacy handbook for business support

Legacy Handbook reviewing emda's experience of business support activity. Identifies key achievements and draws out lessons learned that may be relevant to successor bodies active in this area