Dynamic Procurement under Uncertainty: Optimal Design and Implications for Incomplete Contracts

Article dans une revue: We characterize the optimal dynamic contract for a long-term basic service when an uncertain add-on is required later on. Introducing firm risk aversion has two impacts. Profits for the basic service can be backloaded to induce cheaper information revelation for this service: an Income Effect which reduces output distortions. The firm must also bear some risk to induce information revelation for the add-on. This Risk Effect reduces the level of the add-on but hardens information revelation for the basic service. The interaction between these effects has important implications for the dynamics of distortions, contract renegotiation, and the value of incomplete contracts.

Auteur(s)

Malin Arve, David Martimort

Revue
  • The American Economic Review
Date de publication
  • 2016
Mots-clés
  • Dynamic Contract
Pages
  • 3238-3274
Version
  • 1
Volume
  • 106