This paper first studies how cost padding, auditing and collusion with auditors affect the power of incentive schemes in procurement and regulation. Unaudited cost padding requires fixed price contracts. Incentive schemes are more powerful under imperfect auditing than under perfect auditing and...

In this paper we consider a first-price sealed bid auction with a secret reservation price. Such auctions are used frequently in France to sell timber. Within the independent private values paradigm, we show that the equilibrium strategy of the seller is to choose a reservation price equal to...

We develop progressively models enabling us to characterize optimal contracts between government and firms when uncertainty and various types of asymmetric information (moral hazard and adverse selection) are present. We obtain normative contracts which are close to commonly used contracts with...

We study the implications of the non verifiability of information for the allocation of resources and the bearing of risk in a two party relationship. We consider a two step approach. In step one the two parties define a non contingent contract which will be executed when the non verifiable...

Two parties may agree to a mutually binding contract that will govern their behavior after an uncertain event becomes known. As there is no agent who can both observe this uncertain outcome and enforce the contract, contingent agreements are precluded. However, the parties recognize that the...