The Research on Multi-task Bundling of Public-Private Partnerships Based on Principal-Agent Model

Under the financial crisis, it is important for China to make use of public-private partnerships (PPP) for infrastructure construction. This paper emphasizes multi-task bundling of PPP on the condition of incomplete contracts and asymmetric information, involving the bundling of two tasks of building and operating infrastructures used for the provision of public services, as well as that of three tasks of building, operating and financing infrastructures. It presents a basic model to analyze whether the bundling of different tasks is better than traditional unbundling. It is concluded that, in the incomplete contracts considering the efforts in quality improvement and cost reduction, bundling of the two tasks always strictly dominates unbundling no matter what sign of externality across construction and operation is. It is also concluded that, with the government freely choosing the user charge, bundling of three tasks of building, operating and financing dominates unbundling (that is to say, only bundling two tasks of building and operating).