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on Contract Theory and Applications |
| By: | Kazuhiro Takauchi (Faculty of Business and Commerce, Kansai University); Tomomichi Mizuno (Graduate School of Economics, Kobe University) |
| Abstract: | In vertical relations, by raising input price after downstream research and development (R&D) investment, upstream rms can extract the R&D bene t and have an incentive to set higher input price. As downstream rms underinvest for fear of this hold-up by upstream rms, outputs and input-demand shrink, and all rms become worse off. Previous literature emphasizes that a xed-price contract in which upstream rms rst commit themselves to input prices and downstream rms subsequently invest can resolve the hold-up problem and make all rms better off. By contrast, we show that in a vertical relation between rm-speci c carriers and exporters, the xed-price contract of transport price can make all rms worse off because an efficiency improvement in exporters intensi es inter-regional competition. We also discuss the robustness of the result. |
| Keywords: | Transport-price contracts; Downstream R&D; Firm-specific carrier; Hold-up problem |
| JEL: | L13 F12 O31 R40 |
| Date: | 2017–03 |
| URL: | http://d.repec.org/n?u=RePEc:koe:wpaper:1707&r=cta |
| By: | Miranda Sarmento, J.J. (Tilburg University, Center For Economic Research); Renneboog, Luc (Tilburg University, Center For Economic Research) |
| Abstract: | The renegotiations of public–private partnership (PPP) contracts are commonly considered to be one of the pitfalls of PPPs, as they tend to undermine their (ex ante) efficiency. A renegotiation occurs when specific events change the conditions of a concession, frequently leading to a financial claim from the private sector on the public sector. This paper examines the Portuguese experience with PPP renegotiations by means of a unique panel data of 254 renegotiation events from 1995 to 2012. We find evidence of opportunistic bidding for PPP contracts, which is ex post – after the contract is won and the competition eliminated - leading to renegotiations to increase revenues. Renegotiations last on average 1.8 years. Majority governments are more prone to renegotiate and have more political clout to limit the renegotiation duration. There is no evidence of more renegotiations in election years or when there is a change in government. A better institutional framework, defined as a low country risk, a strong rule of law, and lower corruption, tends to reduce the probability of renegotiations. There is also evidence that at times of higher corruption, more renegotiations occur. The project’s leverage decreases the renegotiation duration. Strong initial bidder competition for a PPP contract leads to long subsequent renegotiations between the winning private party and the government. |
| Keywords: | publi-private partnerships; concessions; Renegotiations |
| JEL: | G38 H54 L51 |
| Date: | 2017 |
| URL: | http://d.repec.org/n?u=RePEc:tiu:tiucen:1979123d-90c5-4ee4-813b-8f7b28acd004&r=cta |
| By: | Christopher Hansman; Jonas Hjort; Gianmarco León; Matthieu Teachout |
| Abstract: | This paper studies the relationship between a firm’s organizational structure and output quality. The setting is a large manufacturing sector in Peru where plants produce a vertically differentiated but otherwise homogeneous product for export: fishmeal. We link customs data to plant level data on each shipment’s quality grade, transaction level data on supplies, and GPS measures of supplier (fishing boat) be- havior. We start by documenting a robust association between the quality grade of a firm’s exports and the share of its inputs that comes from vertically integrated suppliers at the time of production. To understand the source of this relationship, we first show that classical theories of the firm predict that, in incomplete contracts settings, owning productive assets upstream may help a subset of downstream manufacturers attempting to produce high quality output to incentivize quality-effort from the assets’ operators. This explanation finds empirical support: in a given supplier-plant pair, the supplier delivers higher quality inputs (fresher fish) when integrated, and does so comparatively more during periods when (i) the plant aims to produce high quality output, and/or (ii) exogenous variation in upstream production (plankton) conditions makes quality-effort more costly. Finally, we show that firms source more of their inputs from integrated suppliers when faced with firm-specific shocks to demand for high quality exports. These results document an overlooked motivation for vertical integration and that strategic changes in organizational structure help manufacturers in developing countries achieve export success. |
| Keywords: | vertical integration, quality upgrading, trade, Peru |
| JEL: | D2 O1 |
| Date: | 2017–03 |
| URL: | http://d.repec.org/n?u=RePEc:bge:wpaper:961&r=cta |