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on Contract Theory and Applications |
| By: | Giuffrida, Leonardo M.; Rovigatti, Gabriele |
| Abstract: | We empirically investigate the effect of procurement oversight on contract outcomes. In particular, we stress a distinction between public and private oversight: the former is a set of bureaucratic checks enacted by contracting offices, while the latter is carried out by private insurance companies whose money is at stake through the so-called performance bonding. By focusing on the U.S. federal service contracts in the period 2005-2015, we exploit an exogenous variation in the threshold for the application of both sources of oversight in order to separately estimate their causal e effects on execution costs and time. We find that: (i) private oversight has a positive effect on outcomes through the screening of bidders that alters the pool of winning firms; (ii) public oversight negatively affects outcomes, due to excessive red tape induced by low-competence buyers. |
| Keywords: | oversight,procurement,screening,red tape,moral hazard |
| JEL: | D21 D44 D82 H57 L74 |
| Date: | 2018 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:zewdip:18045&r=cta |
| By: | Anqi Li; Ming Yang |
| Abstract: | Recent technology advances have given firms the flexibility to process and analyze sophisticated employee performance data at a reduced and yet significant cost. We develop a theory of optimal incentive contracting where the monitoring technology that governs the above described procedure is part of the designer's strategic planning. In otherwise standard principal-agent models with moral hazard, we allow the principal to partition agents' performance data into any finite categories and to pay for the amount of information that the output signal carries. Through analysis of the trade-off between giving incentives to agents and saving the cost of data processing and analysis, we obtain characterizations of optimal monitoring technologies such as information aggregation, strict MLRP, likelihood ratio-convex performance classification, group evaluation in response to high monitoring costs, and assessing the various task performances according to agents' endogenous tendencies to shirk. We examine the implications of these results for workforce management and firms' internal organizations. |
| Date: | 2018–10 |
| URL: | http://d.repec.org/n?u=RePEc:arx:papers:1810.11471&r=cta |
| By: | Rodrigo Carril; Mark Duggan |
| Abstract: | We study the relationship between market structure and public procurement outcomes. In particular, we ask whether and to what extent consolidation-driven increases in industry concentration affect the way in which the government procures its goods and services. We focus on the defense industry, by far the largest contributor to federal procurement spending in the U.S. This industry experienced a sharp increase in the level of concentration during the 1990s, driven by a series of large mergers between defense contractors. Using detailed microdata on Department of Defense (DoD) contract awards, we estimate the causal effect of industry concentration on a series of procurement outcomes, leveraging the differential impact of these mergers across product markets. We find that market concentration caused the procurement process to become less competitive, with an increase in the share of spending awarded without competition, or via single-bid solicitations. Increased concentration also induced a shift from the use of fixed-price contracts towards cost-plus contracts. However, we find no evidence that consolidation led to a significant increase in acquisition costs of large weapon systems, nor to increased spending at the product market level. We infer that the government’s buyer power, especially relevant in this context given the government is often the only purchaser, constrained firms from exercising any additional market power gained by consolidation. |
| JEL: | H56 H57 L41 |
| Date: | 2018–10 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:25160&r=cta |
| By: | Marco Buso (University of Padova); Cesare Dosi (University of Padova); Michele Moretto (University of Padova) |
| Abstract: | We study the effects of granting an exit option that enables the private party to early terminate a PPP project if it turns out to be loss-making. In a continuous-time setting with hidden information about stochastic operating proï¬ ts, we show that a revenue-maximizing government can optimally trade-off direct subsidies for capital investment against the right of opting out the PPP. In particular, the exit option, acting as a risk-sharing device, can soften agency problems and increase the value-for-money of public spending, even while taking into account the budgetary resources needed to resume the project in the event of early termination by the contractor. |
| Keywords: | Public projects, Public-private partnerships, Adverse selection, Real options, Investment timing, Termination fees |
| JEL: | D81 D82 D86 H54 |
| Date: | 2018–10 |
| URL: | http://d.repec.org/n?u=RePEc:pad:wpaper:0227&r=cta |
| By: | Ghosh, R.K.; Eriksson, M.; Istamov, A. |
| Abstract: | Food produced but not consumed is one the greatest threats to sustainable food systems. While there is evidence in the literature to suggest that food is wasted at all stages of the agri-food chain, the role of take back agreements (TBAs) has not been emphasized. When market conditions are such that TBAs become a tool for the retailers to express coercive power over the supplier, there is an incentive to over-order and hence waste. In this study, a case-based approach was used to explore the existence and implications of coercive power at the retailer-supplier interface due to presence of TBAs in the context of Swedish bread suppliers. Specifically, company data for a medium-sized premium bread supplier in Sweden was analyzed. This supplier faced 30% returns of its total volume produced in the period 2011-15 and had to bear the entire cost of bread rejections, collection and disposal. It was paid only for the bread sold to end customers, and not for the contracted quantity. The findings indicate that TBAs are drivers of food waste at the supplier-retailer interface as it reduces the incentives for retailers to prevent waste. Our study confirms that it is a problem requiring serious policy attention. Acknowledgement : The study was funded by the European Union through the research programme ERA-Net SUSFOOD and the project COnsumers in a SUStainable food supply chain (COSUS). Primary data through interviews were provided by representatives of all major retailers and bread producers in Sweden, while detailed supply data were provided by the bread supplier Salt Kvarn. The company has allowed access to its data for the purposes of research without any anonymity conditions. The authors would like to thank the staff at all the companies involved for their help and cooperation. |
| Keywords: | Agribusiness |
| Date: | 2018–07 |
| URL: | http://d.repec.org/n?u=RePEc:ags:iaae18:277496&r=cta |