Bureaucrats and Public Procurement

This paper deals with a Niskanen type of public-procurement agency. It is shown that the procurement game should be separated into an investment game and a project game, the first game to be played before nature determines the actual real-izations of benefit and costs of the project, the second game to be played afterward. In the first game the relationship-specific investments of agency and seller are determined, in the second game the decision on the production of the project is taken. In contrast to many other incomplete-contract papers, in our Niskanen setting it is meaningless to write one and only one contract which refers to both investment and production. Welfare-optimal procurement of the project can be attained under relatively weak assumptions; welfare-optimal investments of the seller (and only of the seller) may result under special circumstances; welfare-optimal investments of both agency and seller cannot be reached.Bureaucracy, Procurement, incomplete contracts

Bureaucrats and Public Procurement.

This paper deals with a Niskanen type of public-procurement agency. It is shown that the procurement game should be separated into an investment game and a project game, the first game to be played before nature determines the actual realizations of benefit and costs of the project, the second game to be played afterward. In the first game the relationship-specific investments of agency and seller are determined, in the second game the decision on the production of the project is taken. In contrast to many other incomplete-contract papers, in our Niskanen setting it is meaningless to write one and only one contract which refers to both investment and production. Welfare-optimal procurement of the project can be attained under relatively weak assumptions; welfare-optimal investments of the seller (and only of the seller) may result under special circumstances; welfare-optimal investments of both agency and seller cannot be reached.

Self-Correcting Mechanisms in Public Procurement: Why Award and Contract Should be Separated

In public procurement a temporal separation of award and actual contracting can frequently be observed. In this paper we give an explanation for this institutional setting. For incomplete procurement contracts we show that such a separation may increase efficiency. We show that efficiency can be increased by post-award, pre-contract negotiations between the award-winning seller and one of the `losing' sellers. Surprisingly, the efficiency gains can be higher if the award is given to a seller with a lower reputation for quality instead of to a seller with higher reputation. Under certain conditions post-award, pre-contract rent-seeking activities also increase efficiency. This is always the case if the procurement agency is corrupt, but may also occur in the case of lobbying.Procurement, Incomplete contracts, lobbying, corruption

Contests Among Bureaucrats

This paper deals with double lobbying: several bureaucrats participate in joint lobbying to get a high total departmental budget, but they also engage in antagonistic lobbying to reap as high a share of the total budget as possible. The antagonistic lobbying constitutes a contest among the bureaucrats. This paper characterizes the Nash equilibria in lobbying and shows in which way exogenously fixed bureaucratic incomes induce the same or different lobbying behavior as incentive incomes

Earmarked Taxation: Welfare versus Political Support

Compared with the traditional public-finance approach of a monolithic fully informed planner, earmarking of taxation is less likely to be optimal if a principal-agent setting is considered, where taxing and spending are performed by two separate agents which are monitored by the parliament. We assume that the parliament either maximizes welfare or expected votes. Vote maximizers are more inclined to choose earmarking, but at the price of inefficiently high costs

Bureaucrats and Public Procurement

This paper deals with a Niskanen type of public-procurement agency. It is shown that the procurement game should be separated into an investment game and a project game, the first game to be played before nature determines the actual real-izations of benefit and costs of the project, the second game to be played afterward. In the first game the relationship-specific investments of agency and seller are determined, in the second game the decision on the production of the project is taken. In contrast to many other incomplete-contract papers, in our Niskanen setting it is meaningless to write one and only one contract which refers to both investment and production. Welfare-optimal procurement of the project can be attained under relatively weak assumptions; welfare-optimal investments of the seller (and only of the seller) may result under special circumstances; welfare-optimal investments of both agency and seller cannot be reached

Privatization under Asymmetric Information

This paper models privatization as a cooperative game between the government, a trade union and the private shareholders. These players kno w that privatization increases the efficiency of a firm, but only the management of the firm knows the exact value of the relevant productivity-increasing parameter. This incomplete information changes many of the results which were attained in Bös (1991) in a full-information setting

Inefficient R&D in Public Procurement: Negative Consequences of a Separation between Award and Actual Contract

In public procur ement a temporal separation between award and actual contract allows private entrepreneurs who did not get the award to sue to become contractor. Hence, not only the award-winning entrepreneur, but also the losers will engage in relationship-specific investments. Unfortunately, in such a situation it is impossible to find fixed prices which guarantee the achievement of both efficient trade and efficient investment

Inefficient R&D in Public Procurement: Negative Consequences of a Separation between Award and Actual Contract

In public procur ement a temporal separation between award and actual contract allows private entrepreneurs who did not get the award to sue to become contractor. Hence, not only the award-winning entrepreneur, but also the losers will engage in relationship-specific investments. Unfortunately, in such a situation it is impossible to find fixed prices which guarantee the achievement of both efficient trade and efficient investment.Procurement, Incomplete Contracts