@article{Albano:6370,
      recid = {6370},
      author = {Albano, Gian Luigi and Cesi, Berardino},
      title = {Past Performance Evaluation in Repeated Procurement: A  Simple Model of Handicapping},
      address = {2008},
      number = {836-2016-55583},
      series = {PRCG Nota di Lavoro},
      pages = {17},
      year = {2008},
      abstract = {When procurement contracts are awarded through competitive  tendering participating firms commit ex ante to fulfil a  set of contractual duties. However, selected contractors  may find profitable to renege ex post on their promises by  opportunistically delivering lower quality standards. In  order to deter ex post moral hazard, buyers may use  different strategies depending on the extent to which  quality dimensions are contractible, that is, verifiable by  contracting parties and by courts. We consider a stylized  repeated procurement framework in which a buyer awards a  contract over time to two firms with different efficiency  levels. If the contractor does not deliver the agreed level  of performance the buyer may handicap the same firm in  future competitive tendering. We prove that under complete  information extremely severe handicapping is never a  credible strategy for the buyer, rather the latter finds it  optimal to punish the opportunistic firm so as to make the  pool of competitors more alike. In other words, when  opportunistic behaviour arises, the buyer should use  handicapping to “level the playing field”.},
      url = {http://ageconsearch.umn.edu/record/6370},
      doi = {https://doi.org/10.22004/ag.econ.6370},
}