Dynamic Procurement under Uncertainty: Optimal Design and Implications for Incomplete Contracts

Abstract

International audienceWe characterize the optimal dynamic contract for a long-term basic service when an uncertain add-on is required later on. Introducing firm risk aversion has two impacts. Profits for the basic service can be backloaded to induce cheaper information revelation for this service: an Income Effect which reduces output distortions. The firm must also bear some risk to induce information revelation for the add-on. This Risk Effect reduces the level of the add-on but hardens information revelation for the basic service. The interaction between these effects has important implications for the dynamics of distortions, contract renegotiation, and the value of incomplete contracts

Inducing Variety: A Theory of Innovation Contests

“…Since the relationship is between a buyer and only one supplier, the question of variety of approaches does not arise. This is also true for the related work by Arve and Martimort (2016), who study risk-sharing considerations in the design of contracts with ex post adaptation. Additionally, Ding and Wolfstetter (2011) consider a case where a supplier can choose to bypass the contest and negotiate with the buyer directly in an environment where innovation quality is obtained by expending costly effort.…”

Do Exit Options Increase the Value-For-Money of Public-Private Partnerships?

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Termination Fees and Contract Design in Public-Private Partnerships

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