Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/130455
Authors: 
Herweg, Fabian
Schwarz, Marco A.
Year of Publication: 
2016
Series/Report no.: 
CESifo Working Paper 5838
Abstract: 
Cost overrun is ubiquitous in public procurement. We argue that this can be the result of a constraint optimal award procedure when the procurer cannot commit not to renegotiate. If cost differences are more pronounced for more complex designs, it is optimal to fix a simple design ex ante and to renegotiate to a more complex and costlier design ex post. Specifying a simple design initially enhances competition in the auction. Moreover, the procurer cannot benefit from using a multi-dimensional auction, as the optimal scoring rule depends only on the price.
Subjects: 
auction
cost overrun
procurement
renegotiation
JEL: 
D44
D82
H57
Document Type: 
Working Paper

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