Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/162244
Authors: 
Dosi, Cesare
Moretto, Michele
Year of Publication: 
2017
Series/Report no.: 
Nota di Lavoro, Fondazione Eni Enrico Mattei 2.2017
Abstract: 
Drawing on the real-options theory we analyse bidding behaviour in a sealed-bid-first-score procurement auction where suppliers, facing variable production costs, must simultaneously report the contract price and the cost level at which they intend to perform the project. We show that this award mechanism is potentially able to maximize total welfare. Next we look at the time incentives required to ensure compliance with the promised optimal trigger value. We show that ex-post efficiency may call for delay penalties higher than the anticipated harm caused by time overruns, in so doing questioning the efficiency rationale of existing liquidated damages rules.
Subjects: 
Public Procurement
Fixed-price Contracts
Real Options
Time Overruns
Scoring Auctions
Liquidated Damages
JEL: 
C61
D44
D86
K12
Document Type: 
Working Paper

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