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Quality of Outsourced Services, Opportunism and Contract Design

Author

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  • Jean Beuve

    (CES - Centre d'économie de la Sorbonne - UP1 - Université Paris 1 Panthéon-Sorbonne - CNRS - Centre National de la Recherche Scientifique)

  • Lisa Chever

    (IAE Paris - Sorbonne Business School)

Abstract

This paper estimates the impact of contract design on the enforce-ability of quality in outsourced public contracts. Using panel data from 102 cleaning contracts, our results suggest that quality enforcement depends highly on the ex ante contracting process. Such findings are consistent with recent theoretical contributions which consider that the verifiability of agents' actions is endogenously determined by the principals' investments in drafting an explicit contract pertaining to the quality of the agent's output. Moreover, since those quality improvements are not accompanied by price increases, our results suggest that public contract managers have significant leeway to reduce oppor-tunistic behavior for standard transactions.

Suggested Citation

  • Jean Beuve & Lisa Chever, 2017. "Quality of Outsourced Services, Opportunism and Contract Design," Université Paris1 Panthéon-Sorbonne (Post-Print and Working Papers) hal-02139517, HAL.
    • Handle: RePEc:hal:cesptp:hal-02139517
    DOI: 10.1515/rle-2014-0053
    Note: View the original document on HAL open archive server: https://hal.science/hal-02139517
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    References listed on IDEAS

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