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on Contract Theory and Applications |
| By: | Giacomo Calzolari; Leonardo Felli; Johannes Koenen; Giancarlo Spagnolo; Konrad O. Stahl |
| Abstract: | We study how informal buyer-supplier relationships in the German automotive industry affect procurement. Using unique data from a survey focusing on these, we show that more trust, the belief that the trading partner acts to maintain the mutual relationship, is associated with both higher quality of the automotive parts and more competition among suppliers. Yet both effects hold only for parts involving unsophisticated technology, not when technology is sophisticated. We rationalize these findings within a relational contracting model that critically focuses on changes in the bargaining power, due to differences in the costs of switching suppliers. |
| Keywords: | Relational Contracts, Hold-up, Buyer-Supplier Contracts, Bargaining Power |
| JEL: | D86 L14 L62 O34 |
| Date: | 2021–08 |
| URL: | http://d.repec.org/n?u=RePEc:bon:boncrc:crctr224_2021_316&r= |
| By: | Giuffrida, Leonardo M.; Raiteri, Emilio |
| Abstract: | Does workload constitute a bottleneck to a public agency's mission, and if so, to what extent? We ask these questions in the context of the US government's procurement of R&D. We link tender, contract, patent, and office records to the identity of the officer responsible for the procurement process to estimate how workload in the federal acquisition unit affects the execution of R&D contracts. The identification comes from unanticipated retirement shifts among contracting officers, which we use to instrument workload. We find a large increase in patenting at the extensive margin when the same officer is exposed to a declining workload. In our sample, an additional contracting officer in the procurement unit, holding fixed the procurement budget and number of purchases, leads to a two percentage point increase in the probability for an R&D contract to generate patents. We provide suggestive evidence that backlogged contracting officers are unable to devote enough time to tender and contract specifications. |
| Keywords: | Workload,Public Procurement,Contracting Officer,R&D,Patents |
| JEL: | D23 H57 O31 O32 |
| Date: | 2021 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:zewdip:21059&r= |
| By: | Leandro Arozamena; Juan-José Ganuza; Federico Weinschelbaum |
| Abstract: | In order to make competition open, fair and transparent, procurement regulations often require equal treatment for all bidders. This paper shows how a favorite supplier can be treated preferentially (opening the door to home bias and corruption) even when explicit discrimination is not allowed. We analyze a procurement setting in which the optimal design of the project to be contracted is unknown. The sponsor has to invest in specifying the project. The larger the investment, the higher the probability that the initial design is optimal. When it is not, a bargaining process between the winning firm and the sponsor takes place. Profits from bargaining are larger for the favorite supplier than for its rivals. Given this comparative advantage, the favored firm bids more aggressively and then, it wins more often than standard firms. Finally, we show that the sponsor invests less in specifying the initial design, when favoritism is stronger. Underinvestment in design specification is a tool for providing a comparative advantage to the favored firm. |
| Keywords: | Auctions, Favoritism, Auction Design, Renegotiation, Corruption |
| JEL: | C72 D44 D82 |
| Date: | 2021–07–29 |
| URL: | http://d.repec.org/n?u=RePEc:col:000518:019429&r= |
| By: | Sarah Auster; Nicola Pavoni |
| Abstract: | We study the delegation problem between a principal and an agent, who not only has better information about the performance of the available actions but also superior awareness of the set of actions that are actually feasible. We provide conditions under which the agent finds it optimal to leave the principal unaware of relevant options. By doing so, the agent increases the principal's cost of distorting the agent's choices and increases the principal's willingness to grant him higher information rents. We further show that the principal may use the option of renegotiation as a tool to implement actions that are not describable to her at the contracting stage. If the agent renegotiates, his proposal signals information about the payoff state. We demonstrate that limited awareness of actions improves communication in such games: the principal makes a coarser inference from the recommendations of the privately informed agent and accepts a larger number of his proposals. |
| Keywords: | Unawareness, optimal delegation, strategic disclosure |
| JEL: | D82 D83 D86 |
| Date: | 2021–07 |
| URL: | http://d.repec.org/n?u=RePEc:bon:boncrc:crctr224_2021_256v2&r= |