Optimal Procurement Contracts with Pre-€“Project Planning

Arbeitspapier

The paper studies procurement contracts with pre-project investigations in the presence of adverse selection and moral hazard. To model the procurer's roblem, we extend a standard sequential screening model to endogenous information acquisition with moral hazard. The optimal contract displays systematic distortions in information acquisition. Due to a rent effect, adverse selection induces too much information acquisition to prevent cost overruns and too little information acquisition to prevent false project cancelations. Moral hazard mitigates the distortions related to cost overruns yet exacerbates those related to false negatives. The optimal mechanism is a menu of option contracts that achieves the dual goal of providing incentives for information acquisition and truthful information revelation.

Object Details

• Language: Englisch

References and Relationships

• Bibliographic citation: Series: SFB/TR 15 Discussion Paper ; No. 303

Classification and Topics

• Classification: Wirtschaft ; Asymmetric and Private Information; Mechanism Design ; National Government Expenditures and Related Policies: Procurement
• Subject: Information acquisition ; procurement ; dynamic mechanism design ; Beschaffung ; Vertrag ; Informationsversorgung ; Asymmetrische Information ; Moral Hazard ; Prinzipal-Agent-Theorie ; Mechanismus-Design-Theorie ; Theorie

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): Krähmer, Daniel ; Strausz, Roland
• Event: Veröffentlichung
• (who): Sonderforschungsbereich/Transregio 15 - Governance and the Efficiency of Economic Systems (GESY)
• (where): München
• (when): 2010

Further information

• DOI: doi:10.5282/ubm/epub.13251
• Handle: http://hdl.handle.net/10419/94157
• URN: urn:nbn:de:bvb:19-epub-13251-3
• Last update: 10.03.2025, 11:44 AM CET