This article looks at the reasons for and results of contracting out in local public services, with specific regards to its possible effects on price and other performance determinants. It uses a rich city-level dataset of water public services in France between 1998 and 2008. We find evidence, using alternative econometric methods, that contracting out to private operators is associated with higher prices on average ceteris paribus. This pattern is consistent with the study of units switching from an organizational form to another. We finally discuss several reasons for the existing price gap between direct management (public management) and contracting out (private management) using the expense-preferences of managers
