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dc.contributor.authorDosi, Cesareen_US
dc.contributor.authorMoretto, Micheleen_US
dc.description.abstractTime overruns are common in public works and are not confined to inherently complex tasks. One explanation advanced in this paper is that bidders can undergo unpredictable changes in production costs which generate an option value of waiting. By exploiting the real-option approach, we examine how the inability to force sellers to meet the contract time influences their bidding behaviour, and how this can ultimately affect the parties' expected payoffs. Further, we examine the outcome of the bidding process when legal rules prevent the promisee from contracting for damage measures which would grant more than her lost expectation. We show that when the pre-agreed compensatory payments prove insufficient to discourage delayed orders, setting a liquidated damages clause would not lead to a Pareto superior outcome with respect to the no-damage-for delay condition. While such a clause would increase the seller's expected payoff, the buyer's expected payoff is lower than when the contract does not provide for any compensation for late-delivery.en_US
dc.publisher|aFondazione Eni Enrico Mattei (FEEM) |cMilanoen_US
dc.relation.ispartofseries|aNota di lavoro, Fondazione Eni Enrico Mattei: Economy and Society |x45.2012en_US
dc.subject.keywordPublic Procurementen_US
dc.subject.keywordFixed-Price Contractsen_US
dc.subject.keywordCost Uncertaintyen_US
dc.subject.keywordTime Overrunsen_US
dc.subject.keywordLiquidated Damagesen_US
dc.subject.keywordReal Optionsen_US
dc.titleProcurement with unenforceable contract time and the law of liquidated damagesen_US
dc.typeWorking Paperen_US

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