To allot or not to allot public services in Europe? An incomplete contract approach

To allot or not to allot public services in Europe? An incomplete contract approach
Julie De Brux and Claudine Desrieux
Abstract: Using an incomplete contract framework, we analyze the consequences of allotment in public procurement, which has been introduced by the European Directive 2004/18/EC.
We evaluate the impacts both on price and quality of public services provided under public procurement. Our results show that when the quality of the service depend on non-contractible efforts made by the operators, allotment does not maximize the joint payoffs of the public and private parties (i.e. the total surplus), but mainly benefits to public authorities.