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Daniel Danau
''A note on fixed and flexible-term contracts''
( 2009, Vol. 29 No.2 )
Engel et al. (1997 2001 2007) have proposed flexible-term contracts as a solution to suboptimal renegotiation of public-private partnerships. We show that whenever the uncertainty lasts over more than two periods, flexible-term contracts have a drawback. The expected duration of a flexible-term contract can be higher than the (certain) duration of a fixed-term contract, the difference being directly proportional to the volatility of the project.
Keywords: public-private partnerships
JEL: D8 - Information, Knowledge, and Uncertainty: General
Manuscript Received : Dec 02 2008 Manuscript Accepted : May 15 2009

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