A note on fixed and flexible-term contracts

Engel et al. (1997 2001 2007) have proposed flexible-term contracts as a solution to suboptimal renegotiation of public-private partnerships. We show that whenever the uncertainty lasts over more than two periods, flexible-term contracts have a drawback. The expected duration of a flexible-term contract can be higher than the (certain) duration of a fixed-term contract, the difference being directly proportional to the volatility of the project.

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Year of publication:	2009
Authors:	Danau, Daniel
Published in:	Economics Bulletin. - AccessEcon, ISSN 1545-2921. - Vol. 29.2009, 2, p. 964-975
Publisher:	AccessEcon
Subject:	public-private partnerships

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Extent:	application/pdf
Type of publication:	Article
Language:	English
Classification:	D8 - Information and Uncertainty
Source:	RePEc - Research Papers in Economics

Persistent link: https://www.econbiz.de/10008562816