| This dissertation consists of three essays.; The first essay, The Hold-Up Problem in Public Infrastructure Franchising, characterizes the equilibria of the investment decisions in public infrastructure franchising under incomplete contracting and ex-post renegotiation. The parties (government and a firm) are unable to credibly commit to the contracted investment plan, so that a second step investment is renegotiated by the parties at the revision stage. As expected, the possibility of renegotiation affects initial non-verifiable investments. The main conclusion of this essay is that not only underinvestment but also overinvestment in infrastructure may arise in equilibrium, compared to the complete contracting case.; The second essay, Alternative Institutional Arrangements in Network Utilities: An Incomplete Contracting Approach, presents a theoretical assessment of the efficiency implications of privatizing natural monopolies which are vertically related to potential competitive firms. Based on the incomplete contracts and asymmetric information paradigm. I develop a model that analyzes the relative advantages of different institutional arrangements---alternative ownership and market structures in the industry--- in terms of their allocative and productive efficiencies. The main policy conclusion of this essay is that both ownership and the existence of conglomerates in network industries matter. Among other conclusions, this essay provides an economic rationale for a mixed economy in which the network is public and vertical separation of the industry when the natural monopoly is under private ownership.; The last essay, Opportunistic Behavior and Legal Disputes in the Chilean Electricity Sector, analyzes post-contractual disputes in this newly privatized industry. It discusses the presumption that opportunistic behavior and disputes arise due to inadequate market design, ambiguous regulation, and institutional weaknesses. This chapter also assesses the presumption that a large number of legal disputes are inhibited by the nonexistence of institutions able to verify and enforce contracts. An in-depth analysis of six cases of open conflict provides support for such a presumption and highlights the crucial role of an adequate market design. |
