Build it not: normative and positive theories of public-private partnerships

of Toulouse. His teaching and research interests are in the theory of incentives and its applications, regulation, industrial organization and the theory of organizations and political economy. Jerome Pouyet, PhD., is Associate Professor of Economics at the Ecole Polytechnique, Paris. His teaching and research are in industrial orga-nization, regulation and the theory of organizations. This paper analyzes whether the two tasks of building infras-tructures which are socially useful and managing those assets should be bundled or not. When performances contracts can be written, both tasks should be performed altogether by the same firm when a better design of the infrastructure helps also to save on operating costs. Otherwise, tasks should be kept split apart and undertaken by different units. In incomplete contracting environments, we iso-late conditions under which either the traditional form of public provision of services or the more fashionable public-private part-nership optimally emerges. The latter dominates when there is a positive externality but the private benefits from owning assets are small enough. Finally, we take a political economy perspective and study how incentive schemes are modified under the threat of capture of the decision-makers