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The Importance Of Reputation In Awarding Public Contracts

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  • Nicola Doni

Abstract

The main economic literature emphasizes that the efficiency of the awarding procedure depends on the contractual rules, especially those regarding firm's remuneration. In this work we show the existence of a reverse link: when the enforcement of contractual terms is imperfect, the rules of the awarding mechanism can help to improve the efficiency of the contractual relationship. In some circumstances, awarding rules based only on bids are not able to deal with the problem of opportunistic behaviour during the execution of the contract. Our model points out that the public administration can incentivize the contractor's fairness by considering not only competitors' bids, but also their different reputation. Copyright 2006 The Authors Journal compilation � CIRIEC 2006.

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Bibliographic Info

Article provided by Wiley Blackwell in its journal Annals of Public and Cooperative Economics.

Volume (Year): 77 (2006)
Issue (Month): 4 (December)
Pages: 401-429

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Handle: RePEc:bla:annpce:v:77:y:2006:i:4:p:401-429

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Cited by:
  1. Athias, Laure & Saussier, Stéphane, 2007. "Contractual flexibility or rigidity for public private partnerships? Theory and evidence from infrastructure concession contracts," MPRA Paper 10541, University Library of Munich, Germany.
  2. Jeanette Brosig & Timo Heinrich, 2011. "Reputation and Mechanism Choice in Procurement Auctions – An Experiment," Ruhr Economic Papers 0254, Rheinisch-Westfälisches Institut für Wirtschaftsforschung, Ruhr-Universität Bochum, Universität Dortmund, Universität Duisburg-Essen.
  3. Elisabetta Iossa & Patrick Rey, 2010. "Building Reputation for Contract Renewal: Implications for Performance Dynamics and Contract Duration," CEIS Research Paper 155, Tor Vergata University, CEIS, revised 28 May 2010.
  4. Gervasio Ciaccia & Nicola Doni & Fulvio Fontini, 2008. "Auctioning Wind Power Sites when Environmental Quality Matters," "Marco Fanno" Working Papers 0081, Dipartimento di Scienze Economiche "Marco Fanno".
  5. Berardino Cesi & Gian Luigi Albano, 2008. "Past Performance Evaluation in Repeated Procurement: A Simple Model of Handicapping," Working Papers 2008.19, Fondazione Eni Enrico Mattei.

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