Procurement Contracts under Limited Liability
AbstractI analyze in this paper procurement from agents protected by limited liability. I model limited liability as a verifiable bargaining tool that enables the agents to induce renegotiation when the contracted price does not cover the project's cost. I show that the determination of the optimal mechanism is based on a trade-off between playing informal rents and renegotiation costs. When the renegotiation costs are sufficiently large the first price auction is optimal among efficient mechanisms.
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Bibliographic InfoPaper provided by College Dublin, Department of Political Economy- in its series Papers with number 98/3.
Length: 34 pages
Date of creation: 1998
Date of revision:
Contact details of provider:
Postal: Ireland; University College Dublin, Department of Political Economy, Centre for Economic Research, Belfield, Dublin 4
Fax: +353-1-283 0068
Web page: http://www.ucd.ie/economics/
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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.
- D44 - Microeconomics - - Market Structure and Pricing - - - Auctions
- G1 - Financial Economics - - General Financial Markets
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- repec:wop:humbsf:2000-72 is not listed on IDEAS
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- 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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