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来源类型Working Paper
规范类型报告
DOI10.3386/w25547
来源IDWorking Paper 25547
Contract Enforcement and Productive Efficiency: Evidence from the Bidding and Renegotiation of Power Contracts in India
Nicholas Ryan
发表日期2019-02-11
出版年2019
语种英语
摘要Weak contract enforcement may reduce the efficiency of investment in developing countries. I study how contract enforcement affects efficiency in procurement auctions for the largest power projects in India. I gather data on bidding and ex post contract renegotiation and find that the renegotiation of contracts in response to cost shocks is widespread, despite that bidders are allowed to index their bids to future costs like the price of coal. Connected firms choose to index less of the value of their bids to coal prices and, through this strategy, expose themselves to cost shocks to induce renegotiation. I use a structural model of bidding in a scoring auction to characterize equilibrium bidding when bidders are heterogeneous both in cost and in the payments they expect after renegotiation. The model estimates show that bidders offer power below cost due to the expected value of later renegotiation. The model is used to simulate bidding and efficiency with strict contract enforcement. Contract enforcement is found to be pro-competitive. With no renegotiation, equilibrium bids would rise to cover cost, but markups relative to total contract value fall sharply. Production costs decline, due to projects being allocated to lower-cost bidders over those who expect larger payments in renegotiation.
主题Microeconomics ; Market Structure and Distribution ; Other ; Law and Economics ; Industrial Organization ; Industry Studies ; Development and Growth ; Development ; Environmental and Resource Economics ; Energy
URLhttps://www.nber.org/papers/w25547
来源智库National Bureau of Economic Research (United States)
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条目标识符http://119.78.100.153/handle/2XGU8XDN/583220
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Nicholas Ryan. Contract Enforcement and Productive Efficiency: Evidence from the Bidding and Renegotiation of Power Contracts in India. 2019.
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