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on Contract Theory and Applications |
| By: | Giacomo Calzolari; Leonardo Felli; Johannes Koenen; Giancarlo Spagnolo; Konrad O. Stahl |
| Abstract: | Based on data from a comprehensive benchmarking study on buyer-supplier relationships in the German automotive industry, we show that more trust in a relationship is associated with higher idiosyncratic investment by suppliers and better part quality|but also with more competition among suppliers. Both associations hold only for parts involving comparatively unsophisticated technology, and evaporate for parts involving sophisticated technology. We rationalize all these observations by means of a relational contracting model of repeated procurement with non-contractible, buyer-specific investments. In relationships involving higher trust, buyers are able to induce higher investment and more intense competition among suppliers|but only when the buyer has the bargaining power. This ability disappears when the bargaining power resides with the supplier(s). |
| Keywords: | Relational Contracts, Hold-up, Buyer-Supplier Contracts |
| JEL: | D86 L14 |
| Date: | 2019–04 |
| URL: | http://d.repec.org/n?u=RePEc:bon:boncrc:crctr224_2019_081&r=all |
| By: | Daniel Bird; Alexander Frug |
| Abstract: | A common feature of dynamic interactions is that the environment in which they occur typically changes, perhaps stochastically, over time. We consider a general uctuating contracting environment with symmetric information, and identify a systematic e ect of the uctuations in the environment on optimal contracts. We develop a notion of a separable activity that corresponds to a large class of contractual components, and provide a tight condition under which these components manifest a form of seniority: any change that occurs in these components over time, under an optimal contract, favors the agent. We illustrate how our results can be applied in various economic settings. |
| Keywords: | Dynamic contracting, stochastic opportunities. |
| JEL: | D86 |
| Date: | 2019–04 |
| URL: | http://d.repec.org/n?u=RePEc:upf:upfgen:1647&r=all |
| By: | Jääskeläinen, Jan; Tukiainen, Janne |
| Abstract: | We provide novel stylized facts about competition, bidding, entry and bidders across a wide spectrum of public procurement auctions using comprehensive and rich Finnish data. Competition for publicly procured contracts is relatively low with a median bidder count of two (three conditional on receiving any bids). Bidders typically are very heterogeneous in size, which likely limits competition further. Competition seems to work roughly as expected as on average (standardized) bids mainly decrease with the number of actual and potential bidders. Using information on registrations as a good proxy for potential bidders, we show that the ratio of actual to potential bidders increases with the number of actual bidders. We also show that being present in the contracting authority's municipality or province correlates positively with registering, entry (bidding) and winning, but other firm characteristics matter less. While attracting more competition by means of contract and auction rule design is a desirable policy goal and we show suggestive evidence that the use of scoring rule can be an entry barrier, increasing competition may be in practice difficult. Therefore, reservation prices may be a more useful policy tool to alleviate issues associated with the lack of competition. |
| Keywords: | competition, entry, public procurement, Local public finance and provision of public services, D44, H57, H76, L11, |
| Date: | 2019 |
| URL: | http://d.repec.org/n?u=RePEc:fer:wpaper:118&r=all |
| By: | Harrison, Mark (University of Warwick) |
| Abstract: | The informer network was a part of the human capital of the communist police state, which had the property of dissolving the freestanding social capital of ordinary citizens. How was it built, and what was the agency of the informers in the process? A few documents from the archives of the Soviet security police allow us to see good practices as the KGB saw them. They show some of the routes by which informers came to the attention of the KGB, their varied motivations, and their social and psychological strengths and weaknesses. The pivot of the process was a contract for counter-intelligence services. The contract itself was partly written, partly verbal or implied, and highly incomplete. Before the contract, searching and due diligence were required to identify potential recruits. After the contract, to turn a recruit into a productive informer involved a further period of training and monitoring, often extending to renegotiation and further investments by both sides in the capabilities of the informer and the relationship of trust with the handler. Trust and deception were two sides of the informer’s coin. |
| Keywords: | communism, contracts, social capital, state security, surveillance, trust. JEL Classification: H56, N44, P26 |
| Date: | 2019 |
| URL: | http://d.repec.org/n?u=RePEc:cge:wacage:408&r=all |
| By: | Johan Hombert; Jérôme Pouyet; Nicolas Schutz |
| Abstract: | We develop a model of vertical merger waves and use it to study the optimal merger policy. As a merger wave can result in partial foreclosure, it can be optimal to ban a vertical merger that eliminates the last unintegrated upstream firm. Such a merger is more likely to worsen market performance when the number of downstream firms is large relative to the number of upstream firms, and when upstream contracts are nondiscriminatory, linear, and public. On the other hand, the optimal merger policy can be non-monotonic in the strength of synergies or in the degree of downstream product differentiation. |
| Keywords: | vertical mergers, vertical foreclosure, merger waves, merger policy |
| JEL: | L13 |
| Date: | 2019–04 |
| URL: | http://d.repec.org/n?u=RePEc:bon:boncrc:crctr224_2019_084&r=all |