scholarly journals Bidding for Incomplete Contracts: An Empirical Analysis of Adaptation Costs

2014 ◽  
Vol 104 (4) ◽  
pp. 1288-1319 ◽  
Author(s):  
Patrick Bajari ◽  
Stephanie Houghton ◽  
Steven Tadelis
Keyword(s):  
Market Power ◽  
Empirical Model ◽  
Private Information ◽  
Important Determinant ◽  
Incomplete Contracts ◽  
Government Procurement ◽  
Reduced Form ◽  
Contractual Incompleteness ◽  
Procurement Contracts ◽  
Adaptation Costs

Procurement contracts are often renegotiated because of changes that are required after their execution. Using highway paving contracts we show that renegotiation imposes significant adaptation costs. Reduced form regressions suggest that bidders respond strategically to contractual incompleteness and that adaptation costs are an important determinant of their bids. A structural empirical model compares adaptation costs to bidder markups and shows that adaptation costs account for 7.5–14 percent of the winning bid. Markups from private information and market power, the focus of much of the auctions literature, are much smaller by comparison. Implications for government procurement are discussed. (JEL D44, D82, D86, H57, L13, L74, R42)

On Re-invigorating the Australia-China Free Trade Agreement Negotiation Process

2013 ◽  
pp. 672-696 ◽  
Author(s):  
Ling Ling He
Keyword(s):  
Free Trade ◽  
Free Trade Agreement ◽  
Trade Agreement ◽  
Negotiation Process ◽  
Government Procurement ◽  
Procurement Contracts ◽  
The Way

Driven by both economic and geopolitical imperatives, negotiation of the Australia-China Free Trade Agreement (ACFTA) has been slow and difficult. The negotiation process has reached an impasse since the latest round took place in March 2012. Major reasons for this include difficulties encountered in negotiating on agriculture, services, investment, and government procurement contracts and surrounding populist resistance from both Australian and Chinese domestic constituencies. Following more than eight years of negotiations and establishment of closer trade related ties, there is a lot at stake for both countries in the outcome of these discussions. This paper examines these issues and of the way forward towards a workable negotiation process.

Designing Audit Apps for Armchair Auditors to Analyze Government Procurement Contracts

2016 ◽  
Vol 13 (2) ◽  
pp. 71-88 ◽  
Author(s):  
Jun Dai ◽  
Qiao Li
Keyword(s):  
Open Data ◽  
Government Procurement ◽  
Open Government ◽  
Goods And Services ◽  
Procurement Contract ◽  
Open Government Data ◽  
New Type ◽  
Government Procurement Contract ◽  
Government Data ◽  
Procurement Contracts

ABSTRACT Each year, governments around the world spend billions of dollars purchasing a wide variety of goods and services. These governments must spend their money wisely in order to eliminate fraud, waste, and abuse of taxpayer dollars. Although government contracting systems are supposed to be transparent, people may still take advantage of these systems to gain benefits, which leads to high-risk contracts and, sometimes, costly government frauds. Recently, governments in some countries have started open data initiatives in order to make government operations more transparent to their citizens. With the open data, a new type of auditor, called an armchair auditor, could play an important role in monitoring government spending. An armchair auditor could be anyone who has an interest in government expenditures and who usually uses technologies to perform analyses on open data. Few studies have discussed how armchair auditors can better use the open data and what data analytics tools could be applied. To that end, this paper proposes a list of audit apps that could assist armchair auditors in analyzing open government procurement data. These apps could help investigate procurement data from different perspectives, such as validating contractor qualification, detecting defective pricing, etc. This paper uses Brazilian federal government procurement contract data to illustrate the functionality of these apps; however, the apps could be applied to open government data in a variety of other nations.

The Response of Consumption to Income Risk

2017 ◽  
Author(s):  
Tullio Jappelli ◽  
Luigi Pistaferri
Keyword(s):  
Private Information ◽  
Null Hypothesis ◽  
Indirect Evidence ◽  
Precautionary Saving ◽  
Reduced Form ◽  
Research Strategies ◽  
Income Risk ◽  
Distribution Of Wealth ◽  
Market Incompleteness ◽  
Private Savings

Tests of the importance of precautionary saving follow several research strategies. One aims to find a variable (or set of variables) that can approximate the variance of the growth rate of consumption. A second strategy seeks to estimate a reduced form for the level of consumption and wealth with proxies for income risk. A third approach simulates the path of consumption and wealth in models with precautionary saving, matching simulations with the observed distribution of wealth and consumption. Other studies provide indirect evidence for or against the precautionary saving hypothesis. Finally, some papers test the null hypothesis of the precautionary saving model (or more generally, self-insurance), in which risks can only be insured via private savings, against specific alternatives in which researchers make the source of market incompleteness explicit (positing, for instance, that it is due to private information).

scholarly journals Government Procurement with Strings Attached: The Uneven Control of Offsets by the World Trade Organization and Regional Trade Agreements

2016 ◽  
Vol 8 (2) ◽  
pp. 301-321
Author(s):  
David COLLINS
Keyword(s):  
Public Procurement ◽  
Trade Agreements ◽  
Developed Countries ◽  
Government Procurement ◽  
Asian Countries ◽  
Local Economies ◽  
Commercial Markets ◽  
Procurement Contracts ◽  
Harmful Effects ◽  
Wto Agreements

AbstractThis paper explores the practice of governments imposing domestic content-based requirements known as “offsets” on suppliers in order to secure public procurement contracts. Known to cause distortions in international trade, offsets are forbidden under the WTO’s Government Procurement Agreement and in the procurement chapters of several RTAs, although these restrictions have severe limitations with full offset prohibitions only accepted by a handful of developed countries. Given the sensitivity of procurement policy and the need to stimulate local economies, Asian countries in particular show an unwillingness to address offsets in their international agreements. While other WTO agreements restrain the use of local content rules, these regimes are ill-suited to control the harmful effects of offsets in a procurement context because of their focus on traditional commercial markets. The paper suggests that an enlargement of offset prohibitions would be advisable given the expected expansion of global procurement markets commensurate with economic development.

scholarly journals COOPERATION TO REDUCE DEVELOPING COUNTRY EMISSIONS

2012 ◽  
Vol 03 (04) ◽  
pp. 1250023 ◽  
Author(s):  
SUZI KERR ◽  
ADAM MILLARD-BALL
Keyword(s):  
Developing Country ◽  
Private Information ◽  
Wide Spectrum ◽  
Poor Performance ◽  
Incomplete Contracts ◽  
Climate Mitigation ◽  
Industrialized Countries ◽  
Mitigation Cost ◽  
Resource Transfers ◽  
Tradable Credits

Without effective developing country (DC) participation in climate mitigation, it will be impossible to meet global concentration and climate change targets. However, DCS are unwilling and, in many cases, unable to bear the mitigation cost alone. They need huge transfers of resources — financial, knowledge, technology and capability — from industrialized countries (ICs). In this paper, we evaluate instruments that can induce such resource transfers, including tradable credits, mitigation funds and results-based agreements. We identify key constraints that affect the efficiency and political potential of different instruments, including two-sided private information leading to adverse selection; moral hazard and challenging negotiations; incomplete contracts leading to under-investment; and high levels of uncertainty about emissions paths and mitigation potential. We consider evidence on the poor performance of current approaches to funding DC mitigation — primarily purchasing offsets through the Clean Development Mechanism — and explore to what extent other approaches can address problems with offsets. We emphasize the wide spectrum of situations in DCS and suggest that solutions also need to be differentiated and that no one policy will suffice: some policies will be complements, while others are substitutes. We conclude by identifying research needs and proposing a straw man to broaden the range of "contracting" options considered.

scholarly journals Income and Education as the Determinants of Anti-Corruption Attitudes: Evidence from Indonesia

2019 ◽  
Vol 8 (1) ◽  
pp. 153-170
Author(s):  
Anita K. Zonebia ◽  
Arief Anshory Yusuf ◽  
Heriyaldi Heriyaldi
Keyword(s):  
Developing Countries ◽  
Empirical Model ◽  
Important Determinant ◽  
Increasing Returns ◽  
Access To Education ◽  
Effective Measure ◽  
Level Of Education ◽  
Indonesian Population ◽  
Cross Country ◽  
Nonlinear Pattern

A higher level of corruption is found to be associated with a lower level of income in most cross-country studies. However, at any given income level, education can also be a very important determinant of the level of corruption, and failing to include education may bias or overestimate the importance of income. We estimated an empirical model of an individual’s attitude toward anti-corruption using a large sample of 9,020 individuals who represent the Indonesian population and found that the effect of income (measured by expenditure) is either weakened or eliminated when we controlled for the level of education. The effect of education is also found to exhibit a nonlinear pattern, which implies that investing in education will have increasing returns in the form of an anti-corruption attitude. This finding supports the view that increasing access to education is an effective measure to reduce corruption norms, particularly in developing countries.

Factoring Information into Returns

2010 ◽  
Vol 45 (2) ◽  
pp. 293-309 ◽  
Author(s):  
David Easley ◽  
Soeren Hvidkjaer ◽  
Maureen O’Hara
Keyword(s):  
Private Information ◽  
Abnormal Return ◽  
Important Determinant ◽  
Asset Returns ◽  
Investment Portfolio ◽  
Underlying Factor ◽  
Monthly Return

AbstractWe examine the potential profits of trading on a measure of private information (PIN) in a stock. A zero-investment portfolio that is size-neutral but long in high PIN stocks and short in low PIN stocks earns a significant abnormal return. The Fama-French, momentum, and liquidity factors do not explain this return. However, significant covariation in returns exists among high PIN stocks and among low PIN stocks, suggesting that PIN might proxy for an underlying factor. We create a PIN factor as the monthly return on the zero-investment portfolio above and show that it is successful in explaining returns to independent PIN-size portfolios. We also show that it is robust to inclusion of the Pástor-Stambaugh liquidity factor and the Amihud illiquidity factor. We argue that information remains an important determinant of asset returns even in the presence of these additional factors.

Debt Maturity and Asymmetric Information: Evidence from Default Risk Changes

2013 ◽  
Vol 48 (3) ◽  
pp. 789-817 ◽  
Author(s):  
Vidhan K. Goyal ◽  
Wei Wang
Keyword(s):  
Asymmetric Information ◽  
Private Information ◽  
Default Risk ◽  
Important Determinant ◽  
Debt Maturity ◽  
Short Term ◽  
Information Models ◽  
Asset Volatility ◽  
Distance To Default

AbstractAsymmetric information models suggest that a borrower’s choice of debt maturity depends on its private information about its default probabilities, that is, borrowers with favorable information prefer short-term debt while those with unfavorable information prefer long-term debt. We test this implication by tracing the evolution of debt issuers’ default risk following debt issuances. We find that short-term debt issuance leads to a decline inborrowers’ asset volatility and an increase in their distance to default. The opposite is true for long-term debt issues. The results suggest that borrowers’ private information about their default risk is an important determinant of their debt maturity choices.

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