Showing 1 - 7 of 7
We identify the inefficiencies that arise when negotiation between two parties takes place in the presence of transaction costs. First, for some values of these costs it is efficient to reach an agreement but the unique equilibrium outcome is one in which agreement is never reached. Secondly,...
Persistent link: https://www.econbiz.de/10010314845
renegotiation. If the buyer expects renegotiation always to take place, the parties are always able to implement the materially … efficient good ex post. It can be optimal for the buyer, however, to expect that renegotiation does not take place. In this case …
Persistent link: https://www.econbiz.de/10010352374
Cost overrun is ubiquitous in public procurement. We argue that this can be the result of a constraint optimal award procedure when the procurer cannot commit not to renegotiate. If cost differences are more pronounced for more complex designs, it is optimal to fix a simple design ex ante and to...
Persistent link: https://www.econbiz.de/10011451448
Free trade can often lead to resource depletion, such as deforestation in the tropics. This paper first presents a dynamic model whereby the South (S) depletes to export the extracted units (timber) or the produce (beef) from land available after depletion. Because of the damages, the North...
Persistent link: https://www.econbiz.de/10012314856
For the procurement of complex goods the early exchange of information is important to avoid costly renegotiation ex … auctions if sellers are likely to have superior information about possible design improvements, if renegotiation is costly, and …
Persistent link: https://www.econbiz.de/10010500427
We propose a theory of ex post inefficient renegotiation that is based on loss aversion. When two parties write a long …
Persistent link: https://www.econbiz.de/10010291533
-invest in early construction, seeking a renegotiation thereafter. We show that, in a renegotiation-proof contract, the marginal … contractual payoff of the firm is above its renegotiation payoff in the former case, below in the latter. We further show that … when the firm holds private information on the operating conditions, the government may welcome a contractual renegotiation …
Persistent link: https://www.econbiz.de/10012141086