Abstract

https://ssrn.com/abstract=1894821
 
 

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Third-Party Opportunism and the Theory of Public Contracts: Operationalization and Applications


Pablo T. Spiller


University of California, Berkeley - Business & Public Policy Group

Marian Moszoro


George Mason University - Department of Economics; Cornell University - CPIP

2014

In "The Manufacturing of Markets: Legal, Political and Economic Dynamics," edited by Eric Brousseau and Jean-Michel Glachant. Cambridge University Press (ISBN 978-1-107-05371-7), 2014.

Abstract:     
Public contracts seem to be “expensive” and “inefficient” compared to pure private contracts. Higher prices and inefficiencies in the implementation of public contracts result from their specificity and rigidity, which is how public agents limit hazards from third-party opportunism. We present a comprehensible and testable theory of third-party opportunism and its effects on public contracts. We show that, in the presence of third-party opportunism, there exists an equilibrium in which public contracts are specific and rigid, and thus more expensive in their design, implementation, and control than the theoretical first-best in a non-opportunistic world. We use case examples to extend the theory into practical settings and derive empirical implications.

Number of Pages in PDF File: 33

Keywords: Transaction Costs, Procurement, Public Sector Accounting and Audits, Political Processes, Bureaucracy, Policy Making, Political Economy, Opportunism

JEL Classification: D23, D72, D73, D78, H57, H83, P48


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Date posted: July 26, 2011 ; Last revised: February 2, 2014

Suggested Citation

Spiller, Pablo T. and Moszoro, Marian, Third-Party Opportunism and the Theory of Public Contracts: Operationalization and Applications (2014). In "The Manufacturing of Markets: Legal, Political and Economic Dynamics," edited by Eric Brousseau and Jean-Michel Glachant. Cambridge University Press (ISBN 978-1-107-05371-7), 2014. . Available at SSRN: https://ssrn.com/abstract=1894821 or http://dx.doi.org/10.2139/ssrn.1894821

Contact Information

Pablo T. Spiller
University of California, Berkeley - Business & Public Policy Group ( email )
545 Student Services Building
Berkeley, CA 94720
United States
510-642-1502 (Phone)
510-642-2826 (Fax)
Marian W. Moszoro (Contact Author)
George Mason University - Department of Economics ( email )
4400 University Drive
Fairfax, VA 22030
United States
HOME PAGE: http://economics.gmu.edu/people/mmoszoro
Cornell University - CPIP ( email )
Cornell Program in Infrastructure Policy
Ithaca, NY 14853
United States
HOME PAGE: http://www.human.cornell.edu/pam/cpip/people.cfm
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