eprintid: 48227
rev_number: 16
eprint_status: archive
userid: 1482
importid: 105
dir: disk0/00/04/82/27
datestamp: 2023-09-25 08:53:39
lastmod: 2024-03-18 09:10:41
status_changed: 2024-03-18 09:10:41
type: monograph
metadata_visibility: show
creators_name: Arve, Malin
creators_name: Martimort, David
creators_id: david.martimort@tse-fr.eu
creators_idrefppn: 157247783
creators_idrefppn: 070009635
creators_affiliation: Toulouse School of Economics
creators_halaffid: 1002422
title: Auctioning Long-Term Projects under Financial Constraints
ispublished: pub
subjects: subjects_ECO
abstract: We consider a procurement auction for the provision of a basic service to which an add-on must later be appended. Potential providers are symmetric, have private information on their cost for the basic service and the winning firm must also implement the add-on.
To finance cost-reducing activities related to the add-on, this firm may need extra funding by outside financiers. Non-verifiable effort in reducing these costs creates a moral hazard problem which makes the firm’s payoff function for the second period concave in returns over the relevant range. This concavity has two effects: It makes it more attractive to backload payments to facilitate information revelation and uncertainty on the cost of the add-on introduces a background risk which requires a risk premium. In this context, we characterize the optimal intertemporal structure of payments to the winning firm, equilibrium bidding behavior and reserve prices in the first-price auction with bidders.
date: 2023-09
date_type: published
publisher: TSE Working Paper
official_url: http://tse-fr.eu/pub/128474
faculty: tse
divisions: tse
keywords: Auctions
keywords: procurement
keywords: financial constraints
keywords: dynamic mechanism design, asymmetric information
keywords: uncertainty
keywords: endogenous risk aversion.
language: en
has_fulltext: TRUE
view_date_year: 2023
full_text_status: public
monograph_type: working_paper
series: TSE Working Paper
volume: 23-1469
place_of_pub: Toulouse
pages: 46
institution: Université Toulouse Capitole
department: Toulouse School of Economics
book_title: TSE Working Paper
oai_identifier: oai:tse-fr.eu:128474
harvester_local_overwrite: department
harvester_local_overwrite: pending
harvester_local_overwrite: creators_idrefppn
harvester_local_overwrite: creators_halaffid
harvester_local_overwrite: abstract
harvester_local_overwrite: institution
harvester_local_overwrite: place_of_pub
harvester_local_overwrite: pages
harvester_local_overwrite: creators_id
oai_lastmod: 2024-03-13T12:57:30Z
oai_set: tse
site: ut1
citation:   Arve, Malin <https://www.idref.fr/157247783> and Martimort, David <https://www.idref.fr/070009635>  (2023) Auctioning Long-Term Projects under Financial Constraints.  TSE Working Paper, n. 23-1469, Toulouse     
document_url: https://publications.ut-capitole.fr/id/eprint/48227/1/wp_tse_1469.pdf