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on Contract Theory and Applications |
| By: | De Silva, Dakshina G. (Lancaster University); Dunne, Timothy (Federal Reserve Bank of Atlanta); Kosmopoulou, Georgia (University of Oklahoma); Lamarche, Carlos (University of Kentucky) |
| Abstract: | This paper examines bidding behavior in a setting where post-bid-letting project modifications occur. These modifications change both the costs and payouts to the winning contractor, making the contract incomplete. Recent empirical research shows that bidders incorporate the likelihood of such changes in contracts into their bidding strategies. In particular, contractors may adjust bids to compensate for renegotiation, resequencing of tasks, and other costs associated with project modifications. This paper extends this literature by examining bidding behavior and project modifications in Texas, where there has been a significant shift in change order policy. Specifically, Texas sharply reduced its spending on change orders starting in the mid-2000s. In the period before the change in policy, we estimate that project modifications raised bidder costs by 4 percent to 6 percent. In the period after the change in policy, the impact of project modifications on bidder costs is estimated to be closer to 1 percent. |
| Keywords: | procurement auctions; incomplete contracts |
| JEL: | D4 L1 L2 |
| Date: | 2015–12–01 |
| URL: | http://d.repec.org/n?u=RePEc:fip:fedawp:2015-14&r=cta |
| By: | Katolnik, Svetlana; Kukec, Sandra K.; Schöndube, Jens Robert |
| Abstract: | Efficiency of the board structure is usually perceived as linked to a higher degree of monitoring. If monitoring improves performance measurement signals, on which a manager is compensated, it can be considered desirable from the manager's point of view. As a result, having a low degree of board independence (many insiders on the board) may incentivize the board to improve its monitoring technology. However, from a dynamic perspective board monitoring is not always desirable, since it can destroy the ex ante efficient trade-off between risk and incentives under the presence of renegotiation possibility. This provides predictions for an optimal board composition seen from a dynamic perspective. |
| Keywords: | Corporate governance, Board composition, Inside directors, Board incentives |
| JEL: | D81 G34 M41 |
| Date: | 2015–12 |
| URL: | http://d.repec.org/n?u=RePEc:han:dpaper:dp-567&r=cta |