A firm may provide a service to a public authority but this requires a prior investment. Once the private investment and the uncertainty concerning the social value of the service are realized, the public authority can provide the service by its own means. Although such a decision may be welfare-increasing from an ex post point of view, it can reduce the ex ante incentives to invest. We study different options for the public authority (depending on whether it can negotiate with the firm and invest, or invest only), both under complete and incomplete information on the social value of the service. Our results suggest that allowing the local authority to negotiate with the firm tends to improve welfare Link to the article
JULLIEN, B., POUYET, J. and SAND-ZANTMAN, W. (2018). Quel rôle pour les acteurs publics dans l’incitation privée aux investissements ? Revue Economique, 69(6), pp. 985-1007.