Quality incentive contract design in government procurement for innovation

Abstract

Recently, as supply‐side innovation incentive policies do not work well in China, demand‐side instruments, like the government procurement for innovation, are emphasized. However, as the enterprise may be better informed than the government about its initial technology level and effort, the government faces the dual information asymmetry of adverse selection and moral hazard in the process of procurement. Thus, in this paper, series of quality incentive contract models are proposed to illustrate how the government can identify the initial technology type of the enterprise and motivate it to exert effort to improve the innovation quality.

Sustainable Quality-Incentive Contract Design of Public Technology Innovation Procurement under Asymmetry Information

“…The initial technology level type of the enterprise is β(β > 0). Consistent with the existing research [14,62], it is generally believed that the degree of effort to carry out technological innovation (e(β)) is related to the technological type of the enterprise (β). The R&D quality of the enterprise is shown as follows: q(β) = βe(β) + θ. θ is a random disturbance variable subject to normal distribution N(0, σ 2 ) [14,62].…”

“…Our paper differs from previous studies in that we consider quality-incentives in public technology innovation procurement. The study in this paper follows the quality models of Su and Wang [62], but we highlight the characteristics of public technology innovation procurement more, whose main purpose is to enhance the public interest and is distinctly different from general procurement. Therefore, we consider the quality-benefit coefficients of government and enterprises in the model design, reflecting the different effects of the improvement of technology innovation quality on the benefits of both parties.…”

Optimal contract design for live streaming platforms under dual asymmetric information considering corporate social responsibility

“…Subsequently, scholars are increasingly concerned about the problems of simultaneous moral hazard and adverse selection, such as pricing schemes (Zhang et al, 2018) and government procurement (Su & Wang, 2022; Zhang & Xu, 2021). For example, Bolandifar et al (2018) investigate that the buyer may face two issues when designing the sourcing contract: adverse selection and noncontractible capacity, and point out that a single, linear contract could be optimal for the buyer under certain conditions.…”

“…Some researchers have indicated that a reasonable contract design can effectively identify the private information of agents and motivate them to put in optimal service efforts (Ma et al, 2017(Ma et al, , 2013Su & Wang, 2022;Zhang et al, 2018;Zhang & Xu, 2021). However, previous literature on contract design typically assumes that the types of agents are discrete (Bhargava et al, 2022;Xiao & Shi, 2016).…”

Government regulation strategies for inhibiting opportunistic behaviors in construction projects

“…Particularly, the incidents caused by poor quality can result in underperformance of construction projects, such as safety incidents and benefit shortfalls [ 3 , 4 ]. It will not only seriously infringe upon the interests of the state, society, and the people but also cause huge losses to people's lives and property [ 5 ]. These accidents may be caused by individual behaviors that directly contribute to accidents [ 6 ] or organizational factors that influence individual behavior [ 7 , 8 ].…”