Optimal contracting with private military and security companies

Fahn, Matthias; Sadat Hadjer, Tahmina

Optimal contracting with private military and security companies

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Datum

2015

Publikationstyp

Zeitschriftenartikel

Publikationsstatus

Published

Erschienen in

European Journal of Political Economy. 2015, 37, pp. 220-240. ISSN 0176-2680. eISSN 1873-5703. Available under: doi: 10.1016/j.ejpoleco.2014.10.004

Zusammenfassung

Private military and security companies (PMSCs) have been gaining increasing media and scholarly attention particularly due to their indispensable role in the wars in Afghanistan 2001 and Iraq 2003. Nevertheless, theoretical insights into the agency problems inherent when hiring PMSCs and how to optimally incentivize them are scarce. We study the complex relationship between intervening state, host state, and PMSC, taking into account the diverging interests of all involved parties as well as potential agency problems. We develop a theoretical model to characterize a state's optimal choice whether to perform a task associated with an intervening mission itself, or hire a PMSC and optimally design the contract. We find that it might be optimal to hire PMSCs even if they are expected to do a worse job than the intervening state would do itself. Furthermore, the government's reputation in rewarding PMSCs for a good performance is crucial and might render it optimal to only deal with a limited number of PMSCs — who are not necessarily always the most efficient providers.

Fachgebiet (DDC)

330 Wirtschaft

Zitieren

ISO 690

FAHN, Matthias, Tahmina SADAT HADJER, 2015. Optimal contracting with private military and security companies. In: European Journal of Political Economy. 2015, 37, pp. 220-240. ISSN 0176-2680. eISSN 1873-5703. Available under: doi: 10.1016/j.ejpoleco.2014.10.004

BibTex

@article{Fahn2015Optim-39804,
  year={2015},
  doi={10.1016/j.ejpoleco.2014.10.004},
  title={Optimal contracting with private military and security companies},
  volume={37},
  issn={0176-2680},
  journal={European Journal of Political Economy},
  pages={220--240},
  author={Fahn, Matthias and Sadat Hadjer, Tahmina}
}

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