Putting all one’s eggs in one Basket: Relational contracts and the provision of local public services

Claudine Desrieux – ERMES, U. Paris 2, Eshien Chong – ADIS, U. Paris 11 et Stéphane Saussier – GREGOR, U. Paris 1
Abstract: The contracting out of local public services has kept on increasing over the past decades. We observe that local governments regularly choose the same private operator for their different services, i.e. they “bundle » and delegate them to a single firm. We develop a model of relational contracts that shows how this strategy may lead to better performance at lower cost for the public authority. Such a proposition is tested and corroborated using an original database concerning the contractual choices made by 5000 French local public authorities in 1998, 2001 and 2004.
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