Less Risk, More Effort : Demand Risk Allocation in Incomplete Contracts

Détails

ID Serval
serval:BIB_AA5DC3286134
Type
Rapport: document publié par une institution, habituellement élément d'une série.
Sous-type
Working paper: document de travail dans lequel l'auteur présente les résultats de ses travaux de recherche. Les working papers ont pour but de stimuler les discussions scientifiques avec les milieux intéressés et servent de base pour la publication d'articles dans des revues spécialisées.
Collection
Publications
Titre
Less Risk, More Effort : Demand Risk Allocation in Incomplete Contracts
Auteur(s)
Athias L., Soubeyran R.
Institution
LAMETA, University of Montpellier
Date de publication
2012
Numéro
2012-20
Genre
Document de recherche
Langue
anglais
Nombre de pages
19
Résumé
This article investigates the allocation of demand risk within an incomplete contract framework. We consider an incomplete contractual relationship between a public authority and a private provider (i.e. a public-private partnership), in which the latter invests in non-verifiable cost-reducing efforts and the former invests in non-verifiable adaptation efforts to respond to changing consumer demand over time. We show that the party that bears the demand risk has fewer hold-up opportunities and that this leads the other contracting party to make more effort. Thus, in our model, bearing less risk can lead to more effort, which we describe as a new example of âeuro~counter-incentivesâeuro?. We further show that when the benefits of adaptation are important, it is socially preferable to design a contract in which the demand risk remains with the private provider, whereas when the benefits of cost-reducing efforts are important, it is socially preferable to place the demand risk on the public authority. We then apply these results to explain two well-known case studies.
Mots-clé
Public-Private Partnership, Incomplete Contract Theory, Contractual Design, Demand Risk, Counter-Incentives
Création de la notice
11/06/2014 10:47
Dernière modification de la notice
20/08/2019 16:14
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