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Optimal monitoring in dynamic procurement contracts

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  • Asseyer, Andreas

Abstract

Innovation partnerships are a public procurement procedure in the European Union which allows public authorities to bundle the development and supply of innovative goods in a single procurement project. I study optimal monitoring strategies for public authorities in innovation partnerships using a principal–agent model with dynamic adverse selection and moral hazard. I show that monitoring of investments in innovation can be substituted by monitoring of exogenous cost factors that become known during the production phase. Thus, innovation partnerships may also be beneficial instruments if innovative activity is hard to monitor.

Suggested Citation

  • Asseyer, Andreas, 2018. "Optimal monitoring in dynamic procurement contracts," International Journal of Industrial Organization, Elsevier, vol. 59(C), pages 222-252.
    • Handle: RePEc:eee:indorg:v:59:y:2018:i:c:p:222-252
    DOI: 10.1016/j.ijindorg.2018.03.004
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    Cited by:

    1. Congli Su & Mingxi Wang, 2022. "Quality incentive contract design in government procurement for innovation," Managerial and Decision Economics, John Wiley & Sons, Ltd., vol. 43(8), pages 3665-3684, December.

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    More about this item

    Keywords

    Procurement; Monitoring; Innovation partnership; Dynamic contracts;
    All these keywords.

    JEL classification:

    • D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design
    • D86 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Economics of Contract Law
    • H57 - Public Economics - - National Government Expenditures and Related Policies - - - Procurement

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