The paper studies information acquisition in public procurement to mitigate implementation errors that arise when production costs are uncertain ex ante. The principal faces three incentive problems: ex ante and ex post information revelation and information acquisition. Optimal contracts are nevertheless characterized by simple menus, including flexible exit options. Due to the trade--off between rent and efficiency, the principal induces too much (resp. too little) information acquisition to prevent implementation errors based on false positives (resp. negatives).
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Paper provided by Departmental Working Papers in its series Papers with number
036.
Find related papers by JEL classification: D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information H41 - Public Economics - - Publicly Provided Goods - - - Public Goods
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