Showing 1 - 9 of 9
Drawing on the real-options theory we analyse bidding behaviour in a sealed-bid-first-score procurement auction where suppliers, facing variable production costs, must simultaneously report the contract price and the cost level at which they intend to perform the project. We show that this award...
Persistent link: https://www.econbiz.de/10012963948
Exclusive rights, like mineral leases and radio spectrum licences, often hold option-like features. This occurs when licencees do not face the obligation to to develop the lease or to undertake the investment required to use the assigned spectrum. However, to avoid licences being unused for...
Persistent link: https://www.econbiz.de/10013146499
Contracts providing payments for not developing natural areas, or for removing cropland from production, generally require long-term commitments. Landowners, however, can decide to prematurely terminate the contract when the opportunity cost of complying with conservation requirements increases....
Persistent link: https://www.econbiz.de/10013051072
We study the effects of granting an exit option that enables the private party to early terminate a PPP project if it turns out to be loss-making. In a continuous time setting with hidden information about stochastic operating profits, we show that a revenue-maximizing government can optimally...
Persistent link: https://www.econbiz.de/10012895272
We study the competition to operate an infrastructure service by developing a model where firms report a two-dimensional sealed bid: the price to consumers and the concession fee paid to the government. Two alternative bidding rules are considered in this paper. One rule consists of awarding the...
Persistent link: https://www.econbiz.de/10012731100
In a continuous-time setting, we study the design of a dynamic contract between a government and a private entity, wherein the latter commits to pay the government in return for the exclusive right to sell a service by operating a public facility. Private revenues are modelled as depending on...
Persistent link: https://www.econbiz.de/10014261415
Time overruns are common in public works and are not confined to inherently complex tasks. One explanation advanced in this paper is that bidders can undergo unpredictable changes in production costs which generate an option value of waiting. By exploiting the real-option approach, we examine...
Persistent link: https://www.econbiz.de/10014167164
We study the competition to acquire the exclusive right to operate an infrastructure service, by comparing two different specifications for the financial proposals - 'lowest price to consumers' vs 'highest concession fee', and two alternative contractual arrangements: a contract which imposes...
Persistent link: https://www.econbiz.de/10014206873
We study the effects of granting an exit option that enables the private party to early terminate a PPP project if it turns out to be financially loss-making. In a continuous-time setting with hidden information about operating profits, we show that an exit option, acting as a risk-sharing...
Persistent link: https://www.econbiz.de/10012822549