Desenho Contratual de Parcerias Público-Privadas para Presídios/Design Contract of Public-Private Partnerships for Prision

The Public-Private Partnership contracts have been increasingly used in Brazil for the construction and management of prisons. However, these contracts occur in an environment of asymmetric information, which might lead to a problem of moral hazard. This environment is analyzed in this paper through...

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Bibliographic Details
Published in:Economic analysis of law review 2016-01, Vol.7 (1), p.53
Main Authors: dos Reis, Magnus, de Assis, Rodrigo Salvato, Fernandez, Rodrigo Nobre
Format: Article
Language:Portuguese
Subjects:
Economics
Law
Moral hazard
Prisons
Public private partnerships
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Summary:The Public-Private Partnership contracts have been increasingly used in Brazil for the construction and management of prisons. However, these contracts occur in an environment of asymmetric information, which might lead to a problem of moral hazard. This environment is analyzed in this paper through a Principal-Agent model involving the State (Principal) and a consortium of companies that have signed the PPP contracts (Agent). In this model, the benefit of the Principal crucially depends on the quality of the services provided by the Agent (private sector), which might be unobservable, thus creating the information asymmetry. Therefore, it is important to create incentives that can mitigate moral hazard in order to reach a high quality service and achieve an efficient allocation of resources. The proposed theoretical model suggests that PPP contracts in which the company that manages the prison outsources the service of rehabilitation of detainees present the most efficient allocations.
ISSN:2178-0587