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Multidimensional auctions for long-term procurement contracts under the threat of early exit: the case of conservation auctions

Listed author(s):
  • Di Corato, Luca

    ()

    (Department of Economics, Swedish University of Agricultural Sciences)

  • Dosi, Cesare

    ()

    (Department of Economics and Management, University of Padova)

  • Moretto, Michele

    ()

    (Department of Economics and Management, University of Padova)

In this paper we study how early-exit options, embedded in long-term procurement contracts which do not provide for sufficiently strong incentives against contract breach, can affect bidding behaviors in multidimensional procurement auctions and the parties' expected payoffs. We show first that bidders' payoff is lower when competing for contracts with unenforceable contract terms. Secondly, that neglecting the risk of opportunistic behavior by sellers can lead to contract awards that do not maximize the buyer's potential payoff. Finally, we make suggestions about how to mitigate potential misallocations, by pointing out the role of eligibility rules and competition among bidders.

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File URL: http://pub.epsilon.slu.se/12551/1/dicorato_l_etal_150831.pdf
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Paper provided by Department Economics, Swedish University of Agricultural Sciences in its series Working Paper Series with number 2015:6.

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Length: 35 pages
Date of creation: 30 Aug 2015
Handle: RePEc:hhs:slueko:2015_006
Contact details of provider: Postal:
Department of Economics, Box 7013, Swedish University of Agricultural Sciences, SE-750 07 Uppsala, Sweden

Phone: 018-67 1724
Fax: 018-67 3502
Web page: http://www.slu.se/ekonomi

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