Incentive Mechanism Analysis for Government to Regulate Public-Private Partnerships in Infrastructure Administration

Infrastructure public-private partnerships refer to a kind of loose policy. Private sector brings more benefit and higher efficiency than public department in the aspect of public service provision. Public-private partnerships mainly depend on the legal procedures and contracts between government and private sector, which indicates the importance of government supervision. There exists information asymmetry because of industry cost, demand condition and effort level of cost reduction. From the perspective of government supervision and motivation under public-private partnerships, the paper studies the objective function for government and private sector under information asymmetry, government incentive system, and optimum incentive approach for government administration in the infrastructure industry. Importance of incentive mechanism establishment for government to regulate infrastructure industry is also discussed in the paper.