Working paper 100 available now!

The Paradox of Concessions in Developing Countries: A game-theoretic investigation of airport concessions in Brazil

Mauricio Bugarin (UnB) & Frederico Ribeiro (ANAC)

 

After a first wave of privatizations in Latin America in the 1980s, the return of conservative governments in the region points to a renewed cycle of concessions. This paper presents a game-theoretic analysis of airport concessions that explicitly takes into account the two distinct, interacting phases of the concession mechanism: the concession auction and the operation game. The concession contract sets an investment to be made during operation, but the concessionaire may benefit from underinvesting and renegotiating the concession contract with the regulator. The paper shows that the weaker a country’s institutions are, the higher is the probability of underinvestment, and the higher are the auction equilibrium concession fees. This is the “Paradox of Concession”: the more successful the auction is, the less likely the operation will be effective. This research proposes a new mechanism based on benefits for investment rather than punishment for underinvestment with the following properties: It is efficient; frees the government from the weak-institutions problem; increases auction bids; eliminates the “paradox of concessions”; and can be fine-tuned to reduce the likelihood of underinvestment.

Keywords: Game theory, applied mechanism design, airport concession, privatization in Latin America.

 

The Economics and Politics Research Group started publishing its working papers on June 12, 2013. Please check here every week for a new working paper.

 

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HOJE: Segundo e último dia do 7o. EPRG

Atenção: Não percam hoje o segundo dia do Sétimo Encontro Anual do EPRG!

Vejam o convite e o programa ATUALIZADO EM 15.12.2019 abaixo, ou clique aqui.

 

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Contagem regressiva: 1 dia para o 7o. EPRG

Atenção: Falta apenas 1 dia para o início do Sétimo Encontro Anual do EPRG.

Vejam o convite e o programa ATUALIZADO EM 15.12.2019 abaixo, ou clique aqui.

 

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Contagem regressiva: 7 dias para o 7o. EPRG

Atenção: Faltam 7 dias para o início do Sétimo Encontro Anual do EPRG.

Vejam o convite e o programa detalhado abaixo, ou clique aqui.

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Seminário EPRG: KAZUHIRO HARA (EPGE-FGV), Sexta 6/12/2019, 12h FACE/UnB


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Seminário Extraordinário EPRG: MARCELO MEDEIROS (PUC-RIO), Sexta 4/12/2019, 12h FACE/UnB

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Seminário EPRG: LUIS BRAIDO (CADE e FGV-EPGE), Quinta-feira 28/11/2019, 12h FACE/UnB

 

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LAWLE 2019 – Mexico City, 20-21 Nov., 2019

Caro(a)s membros e amigos do EPRG,

Começa nesta quinta-feira na Cidade do México o Sixth Latin American Workshop in Law and Economics, LAWLE 2019.

O EPRG/UnB é uma das quatro instituções organizadoras do evento, que tem periodicidade anual. Vejam detalhes da programação em: www.lawle.org

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Seminário EPRG: DOUGLAS SILVEIRA (Perito Criminal Federal), Sexta 22/11/2019, 12h FACE/UnB

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Seminário EXTRAORDINÁRIO EPRG: JOÃO JOSÉ VALLIM (Perito Criminal Federal), Quinta 21/11/2019, 10:00 FACE/UnB

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