An Empirical Investigation of Procurement Contract Structures
AbstractThis article presents a model of procurement contracting with asymmetric cost information and investigates whether two of the model's predictions are consistent with actual contracts between hospitals and California's Medicaid program. The article first tests for the presence of a fixed-price payment region where Medicaid's payments are independent of hospitals' actual (but unobservable) production costs and then tests whether the size of the fixed-price region depends upon expectations about hospitals' costs. To conduct these tests, the article must first estimate hospitals' "unobservable" costs attributable to Medicaid patients. The article finds evidence of a fixed-price region but cannot confirm that the size of the fixed-price region depends upon expectations about hospitals' costs.
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Bibliographic InfoArticle provided by The RAND Corporation in its journal RAND Journal of Economics.
Volume (Year): 25 (1994)
Issue (Month): 2 (Summer)
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Web page: http://www.rje.org
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- Frech, Ted E, 1998. "Managed Care, Distance Traveled, and Hospital Market Definition," University of California at Santa Barbara, Economics Working Paper Series qt84x5q49q, Department of Economics, UC Santa Barbara.
- Sofia Lundberg, 2005. "Restrictions on Competition in Municipal Competitive Procurement in Sweden," International Advances in Economic Research, Springer, vol. 11(3), pages 329-342, August.
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