Determining the Optimal Length of Regulatory Guarantee: A Length‐of‐contract Auction

Thomas Greve () and Michael Pollitt

Economic Journal, 2017, vol. 127, issue 605, F325-F333

Abstract: We present an auction design to be used in the area of procurement that allows the length of the regulatory funding period to be determined via an auction. It allows bidders to submit bids against a payment for periods of varying lengths, say 25 and 30 years, instead of a fixed 20‐year contract. This can be desirable for securing more favourable terms in financial markets. It yields efficiency and delivers the optimal length of contract, defined as where social value is maximised. The auction is applicable to any infrastructure investment such as energy, transportation or any area that uses contracts.

Date: 2017
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https://doi.org/10.1111/ecoj.12405

Related works:
Working Paper: Determining the optimal length of regulatory guarantee: A Length-of-Contract Auction (2013)
Working Paper: Determining the optimal length of regulatory guarantee: A Length-of-Contract Auction (2013)
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