Utilizad este identificador para citar o enlazar este documento: http://hdl.handle.net/2072/20343

Limited liability and mechanism design in procurement
Burguet, Roberto; Ganuza Fernández, Juan José; Hauk, Esther
Universitat Autònoma de Barcelona. Unitat de Fonaments de l'Anàlisi Econòmica; Institut d'Anàlisi Econòmica
In the presence of cost uncertainty, limited liability introduces the possibility of default in procurement with its associated bank-ruptcy costs. When financial soundness is not perfectly observable, we show that incentive compatibility implies that financially less sound contractors are selected with higher probability in any feasible mechanism. Informational rents are associated with unsound financial situations. By selecting the financially weakest contractor, stronger price competition (auctions) may not only increase the probability of default but also expected rents. Thus, weak conditions are suffcient for auctions to be suboptimal. In particular, we show that pooling firms with higher assets may reduce the cost of procurement even when default is costless for the sponsor.
09-07-2009
Fallida
Responsabilitat limitada
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Documento de trabajo
Working papers; 767.09
         

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