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A Bureaucrat'S Procurement Strategy: Budget Constraints And Rationing

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  • Signe ANTHON
  • Peter BOGETOFT
  • Bo Jellesmark THORSEN

Abstract

ABSTRACT**: We investigate a bureaucratic principal responsible for the procurement of goods and services from private agents. The bureaucrat is evaluated on output and controlled by a limited budget. The agents maximize profit, have private information about variable production costs, and have positive outside options which are lost upon acceptance of a procurement contract. The setting is relevant for, e.g. governmental agencies. We show how this setup makes probabilistic rationing and overproduction for low‐cost agents a useful tool for the bureaucrat.

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  • Signe ANTHON & Peter BOGETOFT & Bo Jellesmark THORSEN, 2007. "A Bureaucrat'S Procurement Strategy: Budget Constraints And Rationing," Annals of Public and Cooperative Economics, Wiley Blackwell, vol. 78(2), pages 221-244, June.
    • Handle: RePEc:bla:annpce:v:78:y:2007:i:2:p:221-244
    DOI: 10.1111/j.1467-8292.2007.00333.x
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    References listed on IDEAS

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    8. Levaggi, Rosella, 1999. "Optimal Procurement Contracts under a Binding Budget Constraint," Public Choice, Springer, vol. 101(1-2), pages 23-37, October.
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    10. Maggi G. & Rodriguez-Clare A., 1995. "On Countervailing Incentives," Journal of Economic Theory, Elsevier, vol. 66(1), pages 238-263, June.
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    Cited by:

    1. Vedel, Suzanne Elizabeth & Jacobsen, Jette Bredahl & Thorsen, Bo Jellesmark, 2015. "Contracts for afforestation and the role of monitoring for landowners’ willingness to accept," Forest Policy and Economics, Elsevier, vol. 51(C), pages 29-37.
    2. Delacote, Philippe & Palmer, Charles & Bakkegaard, Riyong Kim & Thorsen, Bo Jellesmark, 2014. "Unveiling information on opportunity costs in REDD: Who obtains the surplus when policy objectives differ?," Resource and Energy Economics, Elsevier, vol. 36(2), pages 508-527.
    3. Vedel, Suzanne Elizabeth & Jacobsen, Jette Bredahl & Jellesmark Thorsen, Bo, 6. "First Movers, Non Movers and Social Gains from Supporting Entry in Markets for Nature-Based Recreational Goods," Scandinavian Forest Economics: Proceedings of the Biennial Meeting of the Scandinavian Society of Forest Economics, Scandinavian Society of Forest Economics, issue 42, April.
    4. Vedel, Suzanne Elizabeth & Thorsen, Bo Jellesmark & Jacobsen, Jette Bredahl, 2009. "First-movers, non-movers, and social gains from subsidising entry in markets for nature-based recreational goods," Ecological Economics, Elsevier, vol. 68(8-9), pages 2363-2371, June.

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