Guillem CANNEVA (AgroParisTech – ENGREF)
“Private Information and Competition in Tenders for Delegation: An Econometric Analysis of Water Services in France”
Abstract: In France, water supply and sanitation can be delegated to private operators by local communities. The renewal of delegation contracts is often considered to be insufficiently competitive. We hypothesize that this may be due to the fact that the incumbent operator knows the existing network better than his competitors. This type of private information creates what is referred to as a winner’s curse during renewal auctions. We propose a methodology that makes it possible to distinguish this type of information from the more standard private information parameter that characterizes the idiosyncratic productivity of each operator. We have built a model that simultaneously explains the choice of operator made by the local community and the degree of competition during the renewal process. This selection model makes it possible to estimate prices in a second step without a selection bias.
Keywords : Incentive contract, asymmetric information, common value, selection model, water utilities