When should a government provide a service in-house, and when should it contract out provision? We develop a model in which the provider can invest in improving the quality of service or reducing cost. If contracts are incomplete, the private provider has a stronger incentive to engage in both...

We revisit the contract-theoretic literature on privatization initiated by Hart et al. (1997). This literature has two major shortcomings. First, it is focused on ex-ante investment incentives, whereas ex-post inefficiencies which are ubiquitous in the real world cannot be explained. Second,...

This paper examines the publication of quality indicators in service markets with public finance systems, such as education and healthcare markets. We provide a spatial model of product differentiation in which the reporting of such indicators increases consumers’ decision weight on quality...