Specification and negotiation in incomplete contracts Academic Article

abstract

• AbstractWe investigate contractors' bargaining power and holdup on buyers in procurement auctions of incomplete contracts held by California Department of Transportation. Using a model where contractors bid competitively in response to a buyer's choice of initial contract design, we infer the contractors' costs and bargaining power from the bids and transfers negotiated after the auction. We find that the contract winners have substantial bargaining power in postauction negotiation. The average holdup on the buyer is about 20% of project costs. Counterfactual costplus contracts would reduce the buyer's surplus in 72% of the projects, with an average reduction over $382,000.

authors

• An, Yonghong

published proceedings

• RAND JOURNAL OF ECONOMICS

author list (cited authors)

• An, Y., & Tang, X.

citation count

• 9

publication date

• March 2019

publisher

• Wiley  Publisher

keywords

• 38 Economics
• 3801 Applied Economics
• 3802 Econometrics
• 3803 Economic Theory

Digital Object Identifier (DOI)

• 10.1111/1756-2171.12262

start page

• 57

end page

• 92

volume

• 50

issue

• 1

URL

• http://dx.doi.org/10.1111/1756-2171.12262