The simple economics of white elephants
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- dc.contributor.author Ganuza, Juan-José
- dc.contributor.author Llobet, Gerard
- dc.contributor.other Universitat Pompeu Fabra. Departament d'Economia i Empresa
- dc.date.accessioned 2020-05-25T09:27:08Z
- dc.date.available 2020-05-25T09:27:08Z
- dc.date.issued 2019-11-29
- dc.date.modified 2020-05-25T09:26:11Z
- dc.description.abstract This paper shows that the concession model discourages firms from acquiring information about the future profitability of a project. Uninformed contractors carry out good and bad projects because they are profitable in expected terms even though it would have been optimal to invest in screening them out according to their value. White elephants are identified as avoidable negative net present-value projects that are nevertheless undertaken. Institutional arrangements that limit the losses that firms can bear exacerbate this distortion. We characterize the optimal concession contract, which fosters the acquisition of information and achieves the first best by conditioning the duration of the concession to the realization of the demand and includes payments for not carrying out some projects.
- dc.format.mimetype application/pdf*
- dc.identifier https://econ-papers.upf.edu/ca/paper.php?id=1681
- dc.identifier.citation
- dc.identifier.uri http://hdl.handle.net/10230/44790
- dc.language.iso eng
- dc.relation.ispartofseries Economics and Business Working Papers Series; 1681
- dc.rights L'accés als continguts d'aquest document queda condicionat a l'acceptació de les condicions d'ús establertes per la següent llicència Creative Commons
- dc.rights.accessRights info:eu-repo/semantics/openAccess
- dc.rights.uri http://creativecommons.org/licenses/by-nc-nd/3.0/es/
- dc.subject.keyword concession contracts
- dc.subject.keyword information acquisition
- dc.subject.keyword flexible-term concessions.
- dc.subject.keyword Business Economics and Industrial Organization
- dc.title The simple economics of white elephants
- dc.title.alternative
- dc.type info:eu-repo/semantics/workingPaper