Procurement contracts under limited liability

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Title: Procurement contracts under limited liability
Authors: Parlane, Sarah
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Date: 2003
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.
Type of material: Journal Article
Publisher: Economic and Social Studies
Copyright (published version): 2003 Economic and Social Studies
Subject LCSH: Industrial procurement--Mathematical models
Language: en
Status of Item: Peer reviewed
Appears in Collections:Economics Research Collection

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