We analyze the economic consequences of strategic delegation of the right to decide between public or private provision of a governmental service and/or the authority to negotiate and renegotiate with the chosen service provider. Our model encompasses both bureaucratic delegation from a...

We make a positive analysis of the impact of market structure and political preferences on a (local) government's decision to privatize a given service using the framework of Hart, Shleifer and Vishny (1997). We argue that although outsourcing is more attractive when the private market is...