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Report, 2015

Multidimensional auctions for long-term procurement contracts under the threat of early exit : the case of conservation auctions

Di Corato, Luca; Dosi, Cesare; Moretto, Michele

Abstract

In this paper we study how early-exit options, embedded in long-term procurement contracts which do not provide for sufficiently strong incentives against contract breach, can affect bidding behaviors in multidimensional procurement auctions and the parties' expected payoffs. We show first that bidders' payoff is lower when competing for contracts with unenforceable contract terms. Secondly, that neglecting the risk of opportunistic behavior by sellers can lead to contract awards that do not maximize the buyer's potential payoff. Finally, we make suggestions about how to mitigate potential misallocations, by pointing out the role of eligibility rules and competition among bidders.

Keywords

public procurement; scoring auctions; contract breach; real options; conservation contracts

Published in

Working Paper Series / Swedish University of Agricultural Sciences, Department of Economics
2015, number: 2015:6
Publisher: Department of Economics, Swedish University of Agricultural Sciences

Authors' information

Di Corato, Luca
Swedish University of Agricultural Sciences, Department of Economics
Dosi, Cesare
University of Padova
Moretto, Michele
University of Padova

UKÄ Subject classification

Economics

URI (permanent link to this page)

https://res.slu.se/id/publ/119550