Menus of Linear Contracts in Procurement with Type-Dependent Reservation Utility
AbstractThis paper examines the influence of type-dependent reservation utility on the optimality of linear contracts in a Principal-Agent model of procurement. Type-dependency of reservation utility, combined with the requirements of individual rationality and incentive compatibility in the principal's contracts induces a countervailing incentive effect, the strength of which depends on an index of quality or degree of competition that the agent would face in an external private market. The results show how the curvature of the reservation utility dictates whether the optimal contracts can be implemented with a menu of linear contracts, and how the magnitude of the private market index influences the net-transfer rule.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
Bibliographic InfoPaper provided by Australian National University, College of Business and Economics, School of Economics in its series ANU Working Papers in Economics and Econometrics with number 2010-531.
Length: 41 Pages
Date of creation: Oct 2010
Date of revision:
Find related papers by 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
This paper has been announced in the following NEP Reports:
You can help add them by filling out this form.
reading list or among the top items on IDEAS.Access and download statisticsgeneral information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: ().
If references are entirely missing, you can add them using this form.