nep-mic New Economics Papers
on Microeconomics
Issue of 2018‒11‒12
twenty-one papers chosen by
Jing-Yuan Chiou
National Taipei University

  1. Information and Market Power By Bergemann, Dirk; Heumann, Tibor; Morris, Stephen
  2. Pivotal Persuasion By Jimmy Chan; Seher Gupta; Fei Li; Yun Wang
  3. Opinion Dynamics via Search Engines (and other Algorithmic Gatekeepers) By Fabrizio Germano; Francesco Sobbrio
  4. Collective Experimentation: Optimal Exploration By David Austen-Smith; Cesar Martinelli
  5. Dynkin games with incomplete and asymmetric information By Tiziano De Angelis; Erik Ekstr\"om; Kristoffer Glover
  6. Aggregation of experts’ opinions and conditional consensus opinion By Marcello Basili
  7. Decision Under Normative Uncertainty By Franz Dietrich; Brian Jabarian
  8. Stackelberg type dynamic zero-sum game with leader and follower By Tanaka, Yasuhito
  9. Hierarchical Bank Supervision By Rafael Repullo
  10. Circumventing the Hart Puzzle By Lionel De Boisdeffre
  11. A Functional Approach to Revealed Preference By Mikhail Freer; Cesar Martinelli
  12. How to Play Out of Equilibrium: Beating the Average By Schlag, Karl
  13. Complex pricing and consumer-side transparency By Fischer, Christian; Rasch, Alexander
  14. Chinese postman games with repeated players By Arantza (M.A.) Estevez-Fernandez; Herbert Hamers
  15. Intermediated Implementation By Anqi Li; Yiqing Xing
  16. It\'s not my Fault! Self-Confidence and Experimentation By Hestermann, Nina; Le Yaouanq, Yves
  17. The Excess Method: A Multiwinner Approval Voting Procedure to Allocate Wasted Votes By Steven, Brams; Markus, Brill
  18. Firm Heterogeneity and the Pattern of R&D Collaborations By Billand, Pascal; Bravard, Christophe; Durieu, Jacques; Sarangi, Sudipta
  19. The Effects of Downstream Competition on Upstream Innovation and Licensing By Jean-Etienne de Bettignies; Bulat Gainullin; Hua Fang Liu; David T. Robinson
  20. A Broomean model of rationality and reasoning By Franz Dietrich; Antonios Staras; Robert Sugden
  21. Termination Fees and Contract Design in Public-Private Partnerships By Marco Buso; Cesare Dosi; Michele Moretto

  1. By: Bergemann, Dirk; Heumann, Tibor; Morris, Stephen
    Abstract: We consider demand function competition with a finite number of agents and private information. We analyze how the structure of the private information shapes the market power of each agent and the price volatility. We show that any degree of market power can arise in the unique equilibrium under an information structure that is arbitrarily close to complete information. In particular, regardless of the number of agents and the correlation of payoff shocks, market power may be arbitrarily close to zero (so we obtain the competitive outcome) or arbitrarily large (so there is no trade in equilibrium). By contrast, price volatility is always less than the variance of the aggregate shock across agents across all information structures, hence we can provide sharp and robust bounds on some but not all equilibrium statistics. We then compare demand function competition with a different uniform price trading mechanism, namely Cournot competition. Interestingly, in Cournot competition, the market power is uniquely determined while the price volatility cannot be bounded by the variance of the aggregate shock.
    JEL: C72 C73 D43 D83 G12
    Date: 2018–11
  2. By: Jimmy Chan (Department of Economics, Chinese University of Hong Kong); Seher Gupta (Department of Economics, New York University); Fei Li (Department of Eco- nomics, University of North Carolina Chapel Hill); Yun Wang (Wang Yanan Institute for Stud- ies in Economics, Xiamen University)
    Abstract: A sender seeks to persuade a group of heterogeneous voters to adopt an action. We analyze the sender’s information-design problem when the collective decision is made through a majority vote and voting for the action is personally costly. We show that the sender can exploit the heterogeneity in voting costs by privately communicating with the voters. Under the optimal information structure, voters with lower costs are more likely to vote for the sender’s preferred action when it is the wrong choice than those with higher costs. The sender’s preferred action is, therefore, adopted with a higher probability when private communication is allowed than when it is not. Nevertheless, the sender’s preferred action cannot be adopted with probability one if no voter, as a dictator, is willing to vote for it without being persuaded.
    Keywords: Bayesian Persuasion, Information Design, Private Persuasion, Strategic Voting
    JEL: D72 D83
    Date: 2018–11–03
  3. By: Fabrizio Germano; Francesco Sobbrio
    Abstract: Ranking algorithms are the information gatekeepers of the Internet era. We develop a stylized model to study the effects of ranking algorithms on opinion dynamics. We consider a search engine that uses an algorithm based on popularity and on personalization. We find that popularity-based rankings generate an advantage of the fewer effect: fewer websites reporting a given signal attract relatively more traffic overall. This highlights a novel, ranking-driven channel that explains the diffusion of misinformation, as websites reporting incorrect information may attract an amplified amount of traffic precisely because they are few. Furthermore, when individuals provide sufficiently positive feedback to the ranking algorithm, popularity-based rankings tend to aggregate information while personalization acts in the opposite direction.
    Date: 2018–10
  4. By: David Austen-Smith (Department of Managerial Economics and Decision Sciences, Kellogg School of Management, Northwestern University.); Cesar Martinelli (Interdisciplinary Center for Economic Science and Department of Economics, George Mason University)
    Abstract: Consider a decision maker who has to choose one of several alternatives, and who is imperfectly informed about the payoff of each of them. In each period, the decision maker has to decide whether to stop and take one of the alternatives, or to continue researching the alternatives. New information is costly and is never conclusive. We provide a dynamic programming formulation of the decision maker’s problem with either a finite deadline or no deadline, and give necessary and sufficient conditions for research to take place for some prior beliefs about the alternatives. We show that, at least for short deadlines, the decision maker either explores the best alternative and stops after good news, or explores the second best alternative and stops after bad news, with the former path being optimal if the decision maker is relatively optimistic about the payoff of the alternatives.
    Date: 2018–09
  5. By: Tiziano De Angelis; Erik Ekstr\"om; Kristoffer Glover
    Abstract: We study Nash equilibria for a two-player zero-sum optimal stopping game with incomplete and asymmetric information. In our set-up, the drift of the underlying diffusion process is unknown to one player (incomplete information feature), but known to the other one (asymmetric information feature). We formulate the problem and reduce it to a fully Markovian setup where the uninformed player optimises over stopping times and the informed one uses randomised stopping times in order to hide their informational advantage. Then we provide a general verification result which allows us to find Nash equilibria by solving suitable quasi-variational inequalities with some non-standard constraints. Finally, we study an example with linear payoffs, in which an explicit solution of the corresponding quasi-variational inequalities can be obtained.
    Date: 2018–10
  6. By: Marcello Basili
    Abstract: This paper considers aggregation of experts opinions expressed through not necessarily independent but even conflicting probability distributions or multiple priors.The paper addresses elicitation of common opinion and derives its conditional probabilities on future events.
    JEL: D71 D83
    Date: 2018–05
  7. By: Franz Dietrich (CES - Centre d'économie de la Sorbonne - UP1 - Université Panthéon-Sorbonne - CNRS - Centre National de la Recherche Scientifique, PSE - Paris School of Economics); Brian Jabarian (CES - Centre d'économie de la Sorbonne - UP1 - Université Panthéon-Sorbonne - CNRS - Centre National de la Recherche Scientifique, PSE - Paris School of Economics)
    Abstract: How should we evaluate options when we are uncertain about the correct standard of evaluation, for instance due to conflicting normative intuitions? Such ‘normative' uncertainty differs from ordinary ‘empirical' uncertainty about an unknown state, and raises new challenges for decision theory and ethics. The most widely discussed proposal is to form the expected value of options, relative to correctness probabilities of competing valuations. We show that the expected-value theory is just one of four natural expectation-based theories. These theories differ in the attitudes to normative risk and to empirical risk. The ordinary expected-value theory imposes neutrality to normative risk, whereas its attitude to empirical risk is impartial, i.e., determined by the risk attitudes of the competing valuations deemed possible. The three other theories are, respectively, neutral to both types of risk; impartial to both types of risk; or neutral to empirical but impartial to normative risk. We conditionally defend the theory which is impartial to all risk - the impartial value theory - on the grounds that it respects risk-attitudinal beliefs rather than imposing an ad-hoc-risk attitude. Meanwhile, our analysis shows how one can address empirical and normative uncertainty within a unified formal framework, and rigorously define risk attitudes of theories.
    Abstract: Comment devons-nous évaluer des options de choix lorsque nous ne savons pas quelle méthode d'évaluation est correcte, par exemple à cause d'intuitions normatives concurrentes ? Ce type d'incertitude, nommée « incertitude normative », diffère de l'incertitude standard portant sur les états empiriques du monde, nommée « incertitude empirique ». L'incertitude normative constitue un nouveau challenge pour les sciences économiques et l'éthique contemporaine. La proposition la plus discutée dans le débat est de former la valeur normative espérée des options relativement aux croyances normatives de l'agent. Nous montrons que la théorie de la valeur normative espérée n'est qu'une des quatre formes de théories basées sur l'espérance. Ces théories diffèrent dans leurs attitudes aux risques normatifs et empiriques. La théorie de la valeur normative espérée impose une attitude neutre face au risque normatif, tandis que son attitude face au risque empirique est impartiale, c'est-à-dire seulement déterminée par les attitudes au risque des différentes méthodes d'évaluation jugées possibles par l'agent. Les trois autres théories sont respectivement : neutre face aux deux types de risque ; impartiale face aux deux types de risque ; neutre face au risque empirique mais impartiale face au risque normatif. Nous défendons la théorie qui est impartiale face aux deux types de risque, la théorie impartiale de la valeur, sur la base que cette théorie respecte entièrement les croyances normatives de l'agent concernant la « bonne » attitude face au risque plutôt que d'imposer de manière ad hoc une attitude particulière face au risque. Notre article montre comment nous pouvons traiter à travers un seul cadre formel unifié l'incertitude empirique et l'incertitude normative et définir de manière rigoureuse les attitudes face au risque de théories évaluatives.
    Keywords: empirical uncertainty,normative uncertainty,risk attitude,expected value,impartial value,incertitude empirique,incertitude normative,attitude face au risque,valeur normative espérée,valeur impartiale
    Date: 2018–09
  8. By: Tanaka, Yasuhito
    Abstract: We consider a Stackelberg type dynamic two-players zero-sum game. One of two players is the leader and the other player is the follower. The game is a two-stages game. In the first stage the leader determines the value of its strategic variable. In the second stage the follower determines the value of its strategic variable given the value of the leader's strategic variable. On the other hand, in the static game two players simultaneously determine the values of their strategic variable. We will show that Sion's minimax theorem (Sion(1958)) implies that at the sub-game perfect equilibrium of the Stackelberg type dynamic zero-sum game with a leader and a follower the roles of leader and follower are irrelevant to the payoffs of players, and that the Stackelberg equilbria of the dynamic game are equivalent to the equilibrium of the static game.
    Keywords: zero-sum game, Stackelberg, dynamic zero-sum game
    JEL: C72
    Date: 2018–10–20
  9. By: Rafael Repullo (CEMFI, Centro de Estudios Monetarios y Financieros)
    Abstract: This paper presents a model in which a central and a local supervisor contribute their efforts to obtain information on the solvency of a local bank, which is then used by the central supervisor to decide on its early liquidation. This hierarchical model is contrasted with the alternatives of decentralized and centralized supervision, where only the local or the central supervisor collects information and decides on liquidation. The local supervisor has a higher bias against liquidation (supervisory capture) and a lower cost of getting local information (proximity). Hierarchical supervision is the optimal institutional design when the bias of the local supervisor is high but not too high and the costs of getting local information from the center are low but not too low. With low (high) bias and high (low) cost it is better to concentrate all responsibilities in the local (central) supervisor.
    Keywords: Centralized vs decentralized supervision, strategic information acquisition, bank solvency, bank liquidation, supervisory capture, optimal institutional design.
    JEL: G21 G23 D02
    Date: 2017–11
  10. By: Lionel De Boisdeffre (CES - Centre d'économie de la Sorbonne - UP1 - Université Panthéon-Sorbonne - CNRS - Centre National de la Recherche Scientifique, CATT - Centre d'Analyse Théorique et de Traitement des données économiques - UPPA - Université de Pau et des Pays de l'Adour)
    Abstract: The paper demonstrates the existence of sequential equilibria in a pure exchange economy, where asymmetrically informed agents exchange consumption goods and securities of all kinds, on incomplete markets. Standard models rely on Radner's (1972, 1979) rational expectation assumptions, along which agents know the maps between the information signals, the states of nature and the equilibrium prices. As shown by Hart (1975), equilibrium may then fail to exist, even when agents have symmetric information and smooth preferences. In that setting, Duffie-Shafer (1985) shows, from differential topology arguments, that interior equilibria exist generically. The current paper proceeds differently. It drops rational expectations to allow for an infinitesimal uncertainty over future spot prices. This device permits to circumvent Hart's 1975 problem, without using differential topology. Then, the paper shows that a generic condition on payoffs and forecasts guarantees the existence of equilibria. It is consistent with non-transitive preferences, non-interior consumptions, asymmetric information and normalized spot prices at equilibrium. It also serves to prove existence in a more general model, which drops Radner's rational expectations.
    Abstract: Cet article démontre l'existence d'équilibres séquentiels dans une économie d'échange pur, où des agents asymétriquement informés échangent des biens de consommation et des actifs financiers de toutes sortes sur des marchés incomplets. Les modèles standards se fondent sur les hypothèses d'anticipations rationnelles de Radner (1972, 1979), selon lesquelles les agents connaissent la fonction associant les signaux d'information privés des agents, les états de la nature et les prix d'équilibre sur chaque marché spot. Comme le montre Hart (1975), l'équilibre peut ne pas exister sous ces hypothèses, même lorsque tous les agents ont des préférences ordonnées et lisses et la même information. Dans ce cadre, Duffie-Safer (1985) démontre, à partir de la topologie différentielle, l'existence générique d'équilibres intérieurs. Le présent papier procède différemment. Il abandonne les anticipations rationnelles pour permettre une incertitude infinitésimale sur les prix spots de demain. Cela permet de contourner le problème d'existence de Hart (1975), sans recourir à la topologie différentielle. Le papier démontre, ensuite, qu'une condition sur les rendements des actifs et les anticipations des agents, réalisée génériquement, restaure l'existence de l'équilibre sur tous les marchés. Ce résultat est compatible avec des préférences non transitives, des consommations au bord, une information asymétrique et des prix spots normalisés à l'équilibre. Il est utilisé, dans un autre papier, pour prouver l'existence d'équilibres séquentiels dans un modèle plus général d'anticipation des prix, affranchi des hypothèses d'anticipations rationnelles de Radner.
    Keywords: sequential equilibrium,perfect foresight,existence of equilibrium,rational expectations,financial markets,asymmetric information,marchés financiers,anticipations rationnelles,équilibre séquentiel,anticipations parfaites,existence de l'équilibre,asymétrie d'information,arbitrage
    Date: 2018–09
  11. By: Mikhail Freer (ECARES, Universit’e Libre de Bruxelles); Cesar Martinelli (Interdisciplinary Center for Economic Science and Department of Economics, George Mason University)
    Abstract: We develop a systematic, functional approach to revealed preference tests based on completing preferences. Our approach is based on the notion of sequential closure, which generalizes the notion of transitive closure. We show that revealed preference tests developed for various decision theories can be seen as special cases of our approach. We also illustrate the approach constructing revealed preference tests for theories of decision under uncertainty whose revealed preference implications had not been studied before.
    Date: 2018–10
  12. By: Schlag, Karl
    Abstract: We propose a new concept for how to make choices in games without assuming an equilibrium. To beat the average means to obtain a higher payoff against the others than the others obtain amongst themselves, for any way in which the game might be played. Only Nash equilibrium strategies can beat the average. Beating the average is possible in many symmetric games, including Cournot competition with convex demand. In many other games, including Betrand competition, there are strategies that “almost” beat the average. The methodology is easy to implement and extremely versatile, for instance it can incorporate incomplete information.
    Date: 2018
  13. By: Fischer, Christian; Rasch, Alexander
    Abstract: We analyze a situation in which two horizontally differentiated firms compete in two-part tariffs (i.e., a linear and fixed price), and some consumers are not informed about the linear per-unit price. We show that there is a non-monotone relationship between the degree of consumer-side transparency and firm profits. Moreover, different from a situation without uninformed consumers, firms may make higher profits under two-part tariffs than under fixed fees only. There is also a non-monotone relationship between transparency and consumer surplus. Our model can explain why firms are against the abolishment of roaming fees and why the European Commission (EC) promotes it.
    Keywords: fixed fee,linear price,roaming,transparency,two-part tariff
    JEL: D43 L13 L42
    Date: 2018
  14. By: Arantza (M.A.) Estevez-Fernandez (VU Amsterdam); Herbert Hamers (Tilburg University)
    Abstract: This paper analyses Chinese postman games with repeated players, which generalize Chinese postman games by dropping the one-to-one relation between edges and players. In our model, we allow players to own more than one edge, but each edge belongs to at most one player. The one-to-one relation between edges and players is essential for the equivalence between Chinese postman-totally balanced and Chinese postman-submodular graphs shown in Granot et al. (1999). We illustrate the invalidity of this result in our model. Besides, the location of the post office has a relevant role in the submodularity and totally balancedness of Chinese postman games with repeated players. Therefore, we focus on sufficient conditions on the assignment of players to edges to ensure submodularity of Chinese postman games with repeated players, independently of the associated travel costs. Moreover, we provide some insights on the difficulty of finding necessary conditions on assignment functions to this end.
    Keywords: Chinese postman games with repeated players; balanced game; totally balanced game; submodular game; assignment function
    JEL: C71
    Date: 2018–11–05
  15. By: Anqi Li; Yiqing Xing
    Abstract: Many real-world problems such as sales and healthcare regulation involve a principal, multiple intermediaries, and agents with hidden characteristics. In these problems, intermediaries compete through offering menus of multifaceted consumption bundles to agents, whereas the principal is limited to regulating sub-aspects of the sold bundles by legal, informational and administrative barriers. We study how the principal can implement through intermediaries any social choice rule that is incentive compatible and individually rational for agents. When intermediaries have private values, intermediated implementation can be achieved by a per-unit fee schedule that allows intermediaries to break even under the target social choice rule. When intermediaries have interdependent values, per-unit fee schedules cannot generally be used to achieve implementation, whereas regulating the distribution over sub-aspects can under general conditions about the target allocation.
    Date: 2018–10
  16. By: Hestermann, Nina (Toulouse School of Economics); Le Yaouanq, Yves (LMU Munich)
    Abstract: We study the inference and experimentation problem of an agent in a situation where the outcomes depend on the individual\'s intrinsic ability and on an external variable. We analyze the mistakes made by decision-makers who hold inaccurate prior beliefs about their ability. Overconfident individuals take too much credit for their successes and excessively blame external factors if they fail. They are too easily dissatisfied with their environment, which leads them to experiment in variable environments and revise their self-confidence over time. In contrast, underconfident decision-makers might be trapped in low-quality environments and incur perpetual utility losses.
    Keywords: overconfidence; attribution bias; experimentation; learning.;
    JEL: D83
    Date: 2018–11–02
  17. By: Steven, Brams; Markus, Brill
    Abstract: In using approval voting to elect multiple winners to a committee or council, it is desirable that excess votes—approvals beyond those that a candidate needs to win a seat—not be wasted. The excess method does this by sequentially allocating excess votes to a voter’s as-yet-unelected approved candidates, based on the Jefferson method of apportionment. It is monotonic—approving of a candidate never hurts and may help him or her get elected—computationally easy, and less manipulable than related methods. In parliamentary systems with party lists, the excess method is equivalent to the Jefferson method and thus ensures the approximate proportional representation of political parties. As a method for achieving proportional representation (PR) on a committee or council, we compare it to other PR methods proposed by Hare, Andrae, and Droop for preferential voting systems, and by Phragmén for approval voting. Because voters can vote for multiple candidates or parties, the excess method is likely to abet coalitions that cross ideological and party lines and to foster greater consensus in voting bodies.
    Keywords: Approval voting; multiple winners; apportionment method; proportional representation; wasted votes
    JEL: C72 D71 D72
    Date: 2018–10–27
  18. By: Billand, Pascal; Bravard, Christophe; Durieu, Jacques; Sarangi, Sudipta
    Abstract: We consider an oligopoly setting in which firms form pairwise collaborative links in R&D with other firms. Each collaboration generates a value that depends on the identity of the firms that collaborate. First, we provide properties satisfied by pairwise equilibrium networks and efficient networks. Second, we use these properties in two types of situation (1) there are two groups of firms, and the value of a collaboration is higher when firms belong to the same group; (2) some firms have more innovative capabilities than others. These two situations provide clear insights about how firms heterogeneity affects both equilibrium and efficient networks. We also show that the most valuable collaborative links do not always appear in equilibrium, and a public policy that increases the value of the most valuable links may lead to a loss of social welfare.
    Keywords: Networks, R&D collaborations, link value heterogeneity
    JEL: C72 D85 L13
    Date: 2018–08
  19. By: Jean-Etienne de Bettignies; Bulat Gainullin; Hua Fang Liu; David T. Robinson
    Abstract: We study how competition between two downstream firms affects an upstream innovator's innovation strategy, which includes selecting how much innovation to produce and whether to license this innovation to one (targeted licensing) or both (market-wide licensing) downstream competitors. Our model points to a U-shaped relationship between downstream competition and upstream innovation: at low levels of competition, market-wide licensing is optimal and competition reduces innovation, while at high levels of competition targeted licensing is optimal and competition increases innovation. Empirical analysis using a large panel of US data provides clear support for these predictions linking competition, innovation and licensing.
    JEL: L22 L24 O31 O32
    Date: 2018–10
  20. By: Franz Dietrich (CES - Centre d'économie de la Sorbonne - UP1 - Université Panthéon-Sorbonne - CNRS - Centre National de la Recherche Scientifique, PSE - Paris School of Economics); Antonios Staras (UEA - University of East Anglia [Norwich]); Robert Sugden (UEA - University of East Anglia [Norwich])
    Abstract: John Broome has developed an account of rationality and reasoning which gives philosophical foundations for choice theory and the psychology of rational agents. We formalize his account into a model that differs from ordinary choice-theoretic models through focusing on psychology and the reasoning process. Within that model, we ask Broome's central question of whether reasoning can make us more rational: whether it allows us to acquire transitive preferences, consistent beliefs, non-akratic intentions, and so on. We identify three structural types of rationality requirements: consistency requirements, completeness requirements, and closedness requirements. Many standard rationality requirements fall under this typology. Based on three theorems, we argue that reasoning is successful in achieving closedness requirements, but not in achieving consistency or completeness requirements. We assess how far our negative results reveal gaps in Broone's theory, or deficiencies in choice theory and behavioural economics.
    Abstract: John Broome a développé une théorie de la rationalité et du raisonnement qui donne des fondements philosophiques au choix rationnel et à la psychologie d'acteurs rationnels. Nous formalisons cette théorie en définissant un cadre qui diffère de modèles classiques du choix rationnel, en mettant au centre la psychologie et le raisonnement. A travers notre modèle, nous reposons la question centrale de Broome si le raisonnement nous permet d'augmenter notre rationalité : si le raisonnement nous fait acquérir des préférences transitives, des croyances cohérentes, des intentions conformes à nos buts (" non akratiques ") etc. Nous identifions trois types de conditions de rationalité : des conditions de cohérence, des conditions de complétude et des conditions de clôture. Un grand nombre de conditions de rationalité classiques tombent sous cette taxonomie. En nous appuyant sur trois théorèmes, nous montrons que le raisonnement est utile pour arriver à satisfaire des conditions de clôture, mais pas des conditions de cohérence ou de complétude. Nous évaluons enfin dans quelle mesure nos résultats négatifs révèlent des problèmes dans la théorie Broomeienne ou posent des problèmes à la théorie du choix rationnel et l'économie comportementale.
    Keywords: rationality,reasoning,beliefs,consistency,completeness,deductive closure,rationalité,raisonnement,intentions,croyances,préférences,cohérence,complétude,clôture déductive
    Date: 2018–07
  21. 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

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