Publications

Publications
Publications
We strongly believe in open source and giving to our community. We work directly with researchers in academia and seek out new perspectives with our intern and fellowship programs. We generalize our solutions and release them to the world as open source projects. We host discussions and publish our results.

Publications

Rand Journal of Economics 32, no. 3 (Autumn 2001): 387-407

Incentives versus Transaction Costs: A Theory of Procurement Contracts

Patrick Bajari

Inspired by facts from the private-sector construction industry, we develop a model that explains many stylized facts of procurement contracts.

The buyer in our model incurs a cost of providing a comprehensive design and is faced with a tradeoff between providing incentives and reducing ex post transaction costs due to costly renegotiation. We show that cost-plus contracts are preferred to fixed-price contracts when a project is more complex.

We briefly discuss how fixed-price or cost-plus contracts might be preferred to other incentive contracts. Finally, our model provides some microfoundations for ideas from Transaction Cost Economics.

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Proceedings of the 24th International Conference on World Wide Web, 88-96 (2015)

Is Sniping A Problem For Online Auction Markets?

A common complaint about online auctions for consumer goods is the presence of ``snipers,'' who place bids in the final seconds of sequential ascending auctions with predetermined ending times. The literature conjectures that snipers are best-responding to the existence of ``incremental" bidders that bid up to their valuation only as they are outbid. Snipers aim to catch these incremental bidders at a price below their reserve, with no time to respond. As a consequence, these incremental bidders may experience regret when they are outbid at the last moment at a price below their reservation value. We measure the effect of this experience on a new buyer's propensity to participate in future auctions. We show the effect to be causal using a carefully selected subset of auctions from eBay.com and instrumental variables estimation strategy. Bidders respond to sniping quite strongly and are between 4 and 18 percent less likely to return to the platform.

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Journal of Law, Economics and Organization

Auctions versus Negotiations in Procurement: An Empirical Analysis

Patrick Bajari, Robert McMillan

Should the buyer of a customized good use competitive bidding or negotiation to select a contractor? To shed light on this question, we consider several possible determinants that may influence the choice of auctions versus negotiations. We then examine a comprehensive data set of private sector building contracts awarded in Northern California during the years 1995-2000.

The analysis suggests a number of possible limitations to the use of auctions. Auctions may perform poorly when projects are complex, contractual design is incomplete and there are few available bidders.

Furthermore, auctions may stifle communication between buyers and sellers, preventing the buyer from utilizing the contractor's expertise when designing the project. Some implications of these results for procurement in the public sector are discussed. JEL classifications: D23, D82, H57, L14, L22, L74.

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Journal of Industrial Economics, forthcoming

Contracting for Government Services: Theory and Evidence from U.S. Cities

Jonathan Levin

Local governments can provide services with their own employees or by contracting with private or public sector providers. We develop a model of this “make-or-buy” choice that highlights the trade-off between productive efficiency and the costs of contract administration.

We construct a dataset of service provision choices by U.S. cities and identify a range of service and city characteristics as significant determinants of contracting decisions.

Our analysis suggests an important role for economic efficiency concerns, as well as politics, in contracting for government services. JEL codes: D23, D73, H11, L33

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The Effect of Medicaid on Health Care Consumption of Young Adults

Dominic Coey

No information

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