On advance payments in tenders with budget constrained contractors

• 成果类型: Article
• 署名作者: Birulin, Oleksii; Izmalkov, Sergei
• 署名单位: University of Sydney; New Economic School
• 刊物名称: RAND JOURNAL OF ECONOMICS
• ISSN/ISSBN: 0741-6261
• DOI: 10.1111/1756-2171.12428
• 发表日期: 2022
• 页码: 733-762
• 关键词: starting small; procurement; auctions; projects; COSTS; MODEL

摘要

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.