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Economics Colloquia, Series VII. In association with the Tinbergen Institute.

Event details of Jan Boone (CentER, Tilburg University)
Date 11 December 2003
Time 11:00 -12:15

Jan Boone (CentER, Tilburg University)

Socially optimal 'bouwfraude'

Abstract: We consider procurement settings where the value (cost) of a project is the sum of a private value and a pure common value. We make two assumptions on the relation of the private and common value: (i) the private value is relatively cheap to find out, but uncovering the common value is expensive and (ii) the variance of the common value is big relative to the variance in the private values. In this setting we show that firms' incentives to uncover the common value are excessive from a social point of view. Both revenue and social welfare can be improved by making the procurement less competitive. This can be done by reducing the number of firms that participate in the procurement and/or by using a mechanism that is less competitive than a second price auction.

For more information contact: Jacob Goeree: jkg@fee.uva.nl

Lunch is provided.

Organisers:

  • Franc Klaassen (AE)
  • Sophocles Mavroeidis (KE)
  • Arno Riedl (AE)
  • Florian Wagener (CeNDEF)

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