Procurement contracts under limited liability

Sarah Parlane

Open Access publications from School of Economics, University College Dublin

Abstract: This paper analyses procurement when contractors have limited liability and when the sponsor cannot commit to any specific form of future negotiation. It shows that introducing limited liability enhances competition and thus the likelihood of bankruptcy. Among efficient auctions in which only the winner gets paid, the commonly used first price auction is shown to give the lowest probability of bankruptcy. Finally, it shows that the characterisation of a mechanism minimising the project’s cost results from trading-off bankruptcy costs with informational rents.

Keywords: Industrial; procurement--Mathematical; models (search for similar items in EconPapers)
Pages: 21 pages
Date: 2003
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Citations: View citations in EconPapers (16)

Published in: Economic and Social Review, 34(1) 2003

Downloads: (external link)
http://hdl.handle.net/10197/685 Open Access version, 2003 (application/pdf)

Related works:
Journal Article: Procurement Contracts under Limited Liability (2003)
Working Paper: Procurement Contracts under Limited Liability (1998)
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Persistent link: https://EconPapers.repec.org/RePEc:ucn:oapubs:10197/685

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