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Ambiguity Aversion and Cost-Plus Procurement Contracts.

Abstract:

This paper presents a positive theory about the contractual form of procurement contracts under cost uncertainty. While the cost of manufacture is uncertain it can be controlled, to an extent depending on the effort exerted by the agent. The effort exerted by the agent is not contractible but causes disutility to the agent. Hence, the amount of effort exerted depends on the power of incentives built into the terms of reimbursement agreed to in the contract. The analysis in the paper explicitl...

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Publisher:
Department of Economics (University of Oxford)
Series:
Discussion paper series
Publication date:
2003-01-01
Language:
English
UUID:
uuid:07b7b454-00df-4ef7-a727-dafffa081f95
Local pid:
ora:1149
Deposit date:
2011-08-16

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