On advance payments in tenders with budget constrained contractors
We consider procurement auctions in settings where potential contractors have limited funds and face ex post risks, that is, cost overruns that can lead to the contractors' defaults. The bidding strategies and the default decisions are shaped by the incentive—willing to finish—constraints, and...
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| Veröffentlicht in: | The Rand journal of economics 2022-12, Vol.53 (4), p.733-762 |
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| container_end_page | 762 |
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| container_title | The Rand journal of economics |
| container_volume | 53 |
| creator | Birulin, Oleksii Izmalkov, Sergei |
| description | We consider procurement auctions in settings where potential contractors have limited funds and face ex post risks, that is, cost overruns that can lead to the contractors' defaults. The bidding strategies and the default decisions are shaped by the incentive—willing to finish—constraints, and the resource—able to finish and feasibility—constraints. We examine payment schemes where the advance share of the award is paid immediately after the auction with the rest payable upon successful completion of the project. We identify the trade‐offs the procurer faces when choosing among such schemes, and explore the factors that influence the optimal advance share. |
| doi_str_mv | 10.1111/1756-2171.12428 |
| format | Article |
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| ispartof | The Rand journal of economics, 2022-12, Vol.53 (4), p.733-762 |
| issn | 0741-6261 1756-2171 |
| language | eng |
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| source | Wiley Online Library Journals Frontfile Complete; Business Source Complete |
| subjects | Auctions Auktion Beschaffung Bidding Feasibility Finanzierung Konditionen Kreditrisiko Payments Theorie |
| title | On advance payments in tenders with budget constrained contractors |
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