Dynamic Procurement under Uncertainty: Competition and Auctions
Malin Arve  1@  , David Martimort  2@  
1 : NHH Norwegian School of Economics  (NHH)
2 : Paris School of Economics
Université Paris I - Panthéon-Sorbonne
Paris -  France

We introduce risk aversion into the analysis of an optimal procurement contract for a basic service and an add-on whose costs are uncertain. We focus on the case of fixed-size projects that are allocated through competitive tenders. We show how the procurement agency can use the structure of profits to relax the cost of acquisition. We also highlight the ambiguous impact of risk aversion on bidding behavior and reserve prices.


Online user: 1