73 research outputs found

    Incentive Procurement Contracts with Costly R&D

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    This paper provides a model of both R&D and production in procurement processes where firms invest in R&D and compete for a government procurement contract. The optimal incentive procurement contract is characterized to maximize the government's expected welfare. Explicit consideration of the R&D process changes the standard results in several ways. If the traditional Baron-Myerson (1982) type contract is used where there is costly R&D, the government buys too little from the contractor and pays too little. Raising the price paid encourages private R&D and raises the government's welfare. The form of the optimal procurement contract depends on the number of firms. With R&D and optimal procurement the government prefers more than one firm to invest in R&D and to bid for the production contract. But too much competition may discourage private R&D investment and leave the government worse off. Other features of optimal procurement and R&D expenditures are also discussed

    Bidding Rings and the Winner's Curse: The Case of Federal Offshore Oil and Gas Lease Auctions

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    This paper extends the theory of legal cartels to affiliated private value and common value environments, and applies the theory to explain joint bidding patterns in U.S. federal government offshore oil and gas lease auctions. We show that efficient collusion is always possible in private value environments, but may not be in common value environments. In the latter case, fear of the winner's curse can cause bidders not to bid, which leads to inefficient trade. Buyers with high signals may be better off if no one colludes. The bid data is consistent with oil and gas leases being common value assets, and with the prediction that the winner's curse can prevent rings from forming on marginal tracts.

    Incentive Procurement Contracts with Costly R&D

    Get PDF
    This paper provides a model of both R&D and production in procurement processes where firms invest in R&D and compete for a government procurement contract. The optimal incentive procurement contract is characterized to maximize the government's expected welfare. Explicit consideration of the R&D process changes the standard results in several ways. If the traditional Baron-Myerson (1982) type contract is used where there is costly R&D, the government buys too little from the contractor and pays too little. Raising the price paid encourages private R&D and raises the government's welfare. The form of the optimal procurement contract depends on the number of firms. With R&D and optimal procurement the government prefers more than one firm to invest in R&D and to bid for the production contract. But too much competition may discourage private R&D investment and leave the government worse off. Other features of optimal procurement and R&D expenditures are also discussed

    Platform Competition: The Role of Multi-homing and Complementors

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    In this paper we present a model of platform competition in which two firms offer horizontally differentiated platforms and a group of complementors offers products that are complementary to each platform. Consumers can buy either or both platforms (single- or multihoming) and complementors can produce for either or both platforms (single- or multi-production). We first characterize the pricing structure and find that, in equilibrium, consumers are more likely to multihome as the differentiation of platforms decreases or as the number of complementors for either platform increases. We show that the platform and its complementors always benefit from an increase in the number of complementors in their own platform. When single-homing arises in equilibrium, the platform and its complementors suffer from an increase in the number of complementors in the rival platform. We also study the incentives of the platform to integrate with its complementors, to charge them a royalty or give a subsidy, and to sell its own complementary products to the rival platform

    Collaborative simulation method with spatiotemporal synchronization process control

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    When designing a complex mechatronics system, such as high speed trains, it is relatively difficult to effectively simulate the entire system’s dynamic behaviors because it involves multi-disciplinary subsystems. Currently, a most practical approach for multi-disciplinary simulation is interface based coupling simulation method, but it faces a twofold challenge: spatial and time unsynchronizations among multi-directional coupling simulation of subsystems. A new collaborative simulation method with spatiotemporal synchronization process control is proposed for coupling simulating a given complex mechatronics system across multiple subsystems on different platforms. The method consists of 1) a coupler-based coupling mechanisms to define the interfacing and interaction mechanisms among subsystems, and 2) a simulation process control algorithm to realize the coupling simulation in a spatiotemporal synchronized manner. The test results from a case study show that the proposed method 1) can certainly be used to simulate the sub-systems interactions under different simulation conditions in an engineering system, and 2) effectively supports multi-directional coupling simulation among multi-disciplinary subsystems. This method has been successfully applied in China high speed train design and development processes, demonstrating that it can be applied in a wide range of engineering systems design and simulation with improved efficiency and effectiveness

    Platform Competition: The Role of Multi-homing and Complementors

    Get PDF
    In this paper we present a model of platform competition in which two firms offer horizontally differentiated platforms and a group of complementors offers products that are complementary to each platform. Consumers can buy either or both platforms (single- or multihoming) and complementors can produce for either or both platforms (single- or multi-production). We first characterize the pricing structure and find that, in equilibrium, consumers are more likely to multihome as the differentiation of platforms decreases or as the number of complementors for either platform increases. We show that the platform and its complementors always benefit from an increase in the number of complementors in their own platform. When single-homing arises in equilibrium, the platform and its complementors suffer from an increase in the number of complementors in the rival platform. We also study the incentives of the platform to integrate with its complementors, to charge them a royalty or give a subsidy, and to sell its own complementary products to the rival platform
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