This paper studies the optimal structure of procurement contracts between public and private sectors by mainly comparing two typical procurement types: traditional procurement and public-private partnership (PPP). We first set up a principal-agent model focusing on bundling effects of...

We study the effects of granting an exit option that enables the private party to early terminate a PPP project if it turns out to be loss-making. In a continuous time setting with hidden information about stochastic operating profits, we show that a revenue-maximizing government can optimally...