Reducing the debt: is it optimal to outsource an investment?

DOI10.1007/S11579-016-0166-8MaRDI QIDQ317548zbMATH OpenOpenAlexFDO

Authors Benjamin Jourdain, Monique Pontier, Gilles-Edouard Espinosa, Caroline Hillairet

Publication date 30 September 2016

Published in Mathematics and Financial Economics (Search for Journal in Brave)

Full work available at URL https://arxiv.org/abs/1305.4879

zbMATH Keywords

optimizationpartial informationNash equilibriaoutsourcingpublic debtpublic-private-partnershipStackelberg equilibria

Mathematics Subject Classification ID

Decision theory (91B06) Existence of optimal solutions to problems involving randomness (49J55) Problems with incomplete information (optimization) (49N30) Applications of stochastic analysis (to PDEs, etc.) (60H30) General equilibrium theory (91B50) Stochastic models in economics (91B70) Optimal stochastic control (93E20)

Abstract: We deal with the problem of outsourcing the debt for a big investment, according two situations: either the firm outsources both the investment (and the associated debt) and the exploitation to a private consortium, or the firm supports the debt and the investment but outsources the exploitation. We prove the existence of Stackelberg and Nash equilibria between the firm and the private consortium, in both situations. We compare the benefits of these contracts. We conclude with a study of what happens in case of incomplete information, in the sense that the risk aversion coefficient of each partner may be unknown by the other partner.

Recommendations

• Incentive-Compatible Debt Contracts: The One-Period Problem
• Coordinating Investment, Production, and Subcontracting
• Debt contracts and cooperative improvements
• Optimal timing of partial outsourcing decisions
• Default and Renegotiation: A Dynamic Model of Debt

Cites work

• A modelization of public-private partnerships with failure time

Cited in

(3)

• Outsourcing versus technology transfer: Hotelling meets Stackelberg
• Optimal contract with moral hazard for public private partnerships
• Optimal stopping contract for public private partnerships under moral hazard

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