Ocorrerá no dia 13/07/2022 às 16h o Seminário de Pesquisa “THE EFFECT OF EXIT RIGHTS ON COST-BASED PROCUREMENT CONTRACTS” na área de Economia Aplicada, ministrado por Henrique Castro-Pires (University of Surrey)
Autores: Henrique Castro-Pires (apresentador, University of Surrey), Humberto Moreira (FGV/EPGE) e Rodrigo Andrade (Banco Mundial)
Abstract: This paper studies procurement contracts in an environment with dynamic arrival of information and ex-post exit rights. A procuring agency designs contracts for a firm that receives information over time. In the first period, the firm receives a private non-fully informative signal about the project’s cost. In the second period, the firm fully learns the cost and decides whether to keep the contract or take an exogenous ex-post outside option. When the ex-post outside option is sufficiently close to the ex-ante outside option, the optimal mechanism takes a static form: it pools all first-period signal reports into a single contract, and payments depend solely on the second-period reports. The interpretation is that optimal contracts do not condition transfers on ex-ante cost estimates but only on realized costs. Finally, we show that if the procuring agency neglects the firm’s ex-post participation constraint, the firm has the incentive first to underreport expected costs and then take the ex-post outside option if the realized costs are high. This observation is consistent with the ubiquitous cost-overruns observed empirically in procurement projects.