Procurement Contracts under Limited Liability
AbstractThis paper analyses procurement when contractors have limited liability and when the sponsor cannot commit to any specific form of future negotiation. It shows that introducing limited liability enhances competition and thus the likelihood of bankruptcy. Among efficient auctions in which only the winner gets paid, the commonly used first price auction is shown to give the lowest probability of bankruptcy. Finally, it shows that the characterisation of a mechanism minimising the project’s cost results from trading-off bankruptcy costs with informational rents.
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Bibliographic InfoArticle provided by Economic and Social Studies in its journal Economic and Social Review.
Volume (Year): 34 (2003)
Issue (Month): 1 ()
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Other versions of this item:
- Parlane, Sarah, 2003. "Procurement contracts under limited liability," Open Access publications from University College Dublin urn:hdl:10197/685, University College Dublin.
- Parlane, S., 1998. "Procurement Contracts under Limited Liability," Papers 98/3, College Dublin, Department of Political Economy-.
- D44 - Microeconomics - - Market Structure and Pricing - - - Auctions
- G1 - Financial Economics - - General Financial Markets
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- Steven A. Matthews, 1985.
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664R, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
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Econometric Society, vol. 52(6), pages 1473-1518, November.
- repec:wop:humbsf:2000-72 is not listed on IDEAS
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- R. Preston McAfee & John McMillan, 1986. "Bidding for Contracts: A Principal-Agent Analysis," RAND Journal of Economics, The RAND Corporation, vol. 17(3), pages 326-338, Autumn.
- Jean Tirole, 1985.
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362, Massachusetts Institute of Technology (MIT), Department of Economics.
- Spulber, Daniel F, 1990. "Auctions and Contract Enforcement," Journal of Law, Economics and Organization, Oxford University Press, vol. 6(2), pages 325-44, Fall.
- Yossef Spiegel, 1996. "The Role of Debt in Procurement Contracts," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 5(3), pages 379-407, 09.
- Chang, Wei-Shiun & Salmon, Timothy C. & Saral, Krista Jabs, 2013. "Procurement Auctions with Renegotiation and Wealth Constraints," MPRA Paper 50137, University Library of Munich, Germany.
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