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on Contract Theory and Applications |
| By: | Benito Arruñada |
| Abstract: | Recurrent difficulties are delaying what for the time being are still modest applications of blockchain. This paper identifies what value this new technology adds to the contractual and property processes, exploring its potential and analyzing the main difficulties it is facing. Paying particular attention to the distinction between contract (personal or in personam) rights and property (real or in rem) rights, it first examines the difficulties for trading contract rights through blockchain-based applications, mainly those to complete contracts ex ante without relying on third-party enforcers. Second, it explores the difficulties faced by blockchain to enable trade in property rights. |
| Keywords: | Property rights, enforcement, transaction costs, impersonal exchange, blockchain, distributed ledgers, smart contracts, registries |
| JEL: | D23 K11 K12 L85 G38 H41 O17 P48 |
| Date: | 2020–02 |
| URL: | http://d.repec.org/n?u=RePEc:bge:wpaper:1155&r=all |
| By: | Sander Onderstal (University of Amsterdam); Yang Yang (Sun Yat-Sen University) |
| Abstract: | In procurement auctions, bidders are usually better informed about technical, financial, or legal aspects of the goods and services procured. Therefore, the buyer may include a dialogue in the procurement procedure which enables the suppliers to reveal information that will help the buyer to better specify the terms of the contract. This paper addresses the question of the value added of letting the sourcing process consist of both an auction and a negotiation stage, theoretically and in a laboratory experiment. Our theoretical results suggest that in a setting where the buyer and the suppliers have aligned interests regarding the terms of the contract, allowing the winning supplier to communicate with the buyer after the auction is beneficial to the buyer compared to no communication and ex-ante communication. In a setting where the buyer and the winning supplier have misaligned interests regarding the terms, the buyer benefits from ex-ante communication relative to no communication and ex-post communication. Our experimental data provide strong evidence for the predictions in the aligned-interest setting. In the misaligned-interest setting, we do not observe significant differences between the three mechanisms. Our experimental findings offer several managerial implications for the appropriate design of sourcing processes. |
| Keywords: | Procurement auctions, bidding, cheap-talk communication, negotiations, game theory, experimental economics |
| JEL: | C92 D44 D82 |
| Date: | 2020–02–22 |
| URL: | http://d.repec.org/n?u=RePEc:tin:wpaper:20200013&r=all |
| By: | Benjamin Kang; James Unwin |
| Abstract: | In an auction each party bids a certain amount and the one which bids the highest is the winner. Interestingly, auctions can also be used as models for other real-world systems. In an all pay auction all parties must pay a forfeit for bidding. In the most commonly studied all pay auction, parties forfeit their entire bid, and this has been considered as a model for expenditure on political campaigns. Here we consider a number of alternative forfeits which might be used as models for different real-world competitions, such as preparing bids for defense or infrastructure contracts. |
| Date: | 2020–02 |
| URL: | http://d.repec.org/n?u=RePEc:arx:papers:2002.02599&r=all |
| By: | Eduardo Engel; Ronald D. Fischer; Alexander Galetovic |
| Abstract: | Public-private partnerships (PPPs) have emerged as a new organizational form to provide public infrastructure over the last 30 years. Governments find them attractive because PPPs can be used to avoid fiscal check-and-balances and increase spending. At the same time, PPPs can lead to important efficiency gains, especially for transportation infrastructure. These gains include better maintenance, reduced bureaucratic costs, and filtering white elephants. For these gains to materialize, it is necessary to deal with the governance of PPPs, which is more demanding than for the public provision of infrastructure. The governance can be improved by the use of contracts with appropriate risk allocation and by avoiding opportunistic renegotiations, which have been pervasive. The good news is that, based on the experience with PPPs over the last three decades, we have learnt how to address these challenges. |
| JEL: | H11 H42 H83 |
| Date: | 2020–02 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:26766&r=all |
| By: | Francesco Decarolis (Bocconi University); Cristina Giorgiantonio (Bank of Italy) |
| Abstract: | This paper contributes to the analysis of quantitative indicators (i.e., red flags or screens) to detect corruption in public procurement. Expanding the set of commonly discussed indicators in the literature to new ones derived from the operating practices of police forces and the judiciary, this paper verifies the presence of these red flags in a sample of Italian awarding procedures for roadwork contracts in the period 2009-2015. Then, it validates the efficacy of the indicators through measures of direct corruption risks (judiciary cases and police investigations for corruption-related crimes) and indirect corruption risks (delays and cost overruns). From a policy perspective, our analysis shows that the most effective red flags in detecting corruption risks are those related to discretionary mechanisms for selecting private contractors (such as the most economically advantageous offer or negotiated procedures), compliance with the minimum time limit for the submission of tenders and subcontracting. Moreover, our analysis suggests that greater standardization in the call for tender documents can contribute to reducing corruption risks. From a methodological point of view, the paper highlights the relevance of prediction approaches based on machine learning methods (especially the random forests algorithm) for validating a large set of indicators. |
| Keywords: | public procurement, corruption, red flags |
| JEL: | D44 D47 H57 R42 |
| Date: | 2020–02 |
| URL: | http://d.repec.org/n?u=RePEc:bdi:opques:qef_544_20&r=all |
| By: | Benito Arruñada |
| Abstract: | With a focus on public registries, this article analyzes the organization of public registries comparing five organizational forms: (1) the bureaucratic expense centers used to provide privately valuable services in the welfare state; (2) the internal markets introduced to reform them and the hybrid solutions that have been used by the liberal state since the 19th century to provide such privately valuable services, including (3) revenue centers based on user fees, (4) franchised systems in which professional civil servants are in addition paid with the profit of an office, and (5) the contemporary variant in which the Government contracts out the provision of the whole service to a private firm. This comparison suggests that market forces may play a better role in organizing public registries when they are limited to a few variables, which makes stronger incentives possible and, at the same time, reduces the need for extensive planning and supervisory staff. |
| Keywords: | internal markets, competition, Bureaucracy, registries, welfare, Incentives, user fees, user choice, privatization |
| JEL: | H11 H42 H51 H52 K23 |
| Date: | 2020–02 |
| URL: | http://d.repec.org/n?u=RePEc:bge:wpaper:1154&r=all |