Elisabetta Iossa

Competition Among Universities and the Emergence of the Elite Institution

We consider an environment where two education institutions compete by selecting the proportion of their funding devoted to teaching and research and the criteria for admission for their students, and where students choose whether and where to attend university. We study the relationship between the cost incurred by students for attending a university located away from their home town and the equilibrium configuration that emerges in the game played by the universities. Symmetric equilibria, where universities choose the same admission standard, only exist when the mobility cost is high; when the mobility cost is very low, there is no pure strategy equilibrium. For intermediate values of the mobility cost, only asymmetric equilibria may exist; the final section of the paper provides an example where asymmetric equilibria do indeed exist for a plausible and robust set of parameters.

Information Provision and Monitoring of the Decision-Maker in the Presence of an Appeal Process

We consider a setting where a decision-maker has to resolve a dispute between two parties. On demand of the losing party, the decision may be subject to review by an appellate body. The decision-maker has discretionary power and may be opportunistic. Depending on the institution design, information on the dispute is provided either by the parties themselves or by an independent investigator. We show that information provision by the parties generates more efficient monitoring through appeals and less opportunism by the decision-maker than information provision by the investigator. We discuss our results in light of the adversarial-versus-inquisitorial controversy.

Price cap regulation and information acquisition

Abstract In this paper we endogenize the information structure under price cap regulation. We show that, in order to induce the firm to acquire valuable but costly information, price cap mechanisms need to ensure high profits to the firm. Further, we compare incentives for information acquisition under price cap regulation and under the optimal mechanism designed to deal with the standard case where asymmetric information is assumed. We show that the latter provides higher incentives for information acquisition and that the welfare loss associated with price cap regulation — with respect to the optimal regulatory mechanism — increases when the issue of information acquisition is considered.

Contracts as Threats: On a Rationale for Rewarding A While Hoping for B

In this paper we explore theoretically the relationship between explicit and implicit/relational contracting distinguishing between the ex-ante decision to sign an explicit contract and the ex-post decision wheter to actually apply it. We show, among other things, that the relational efficient explicit contract tends to display overcontracting on tasks or qualitative requirements (A) that are verifiable but apparently of little use for the principal. The ex-post (non)implementation of such explicit contract can then be discretionally exchanged against the provision of non contractible tasks (B) that are highly valuable for the principal. An empirical implication of the result, consistent with casual observation in procurement, is that penalties for infringements established by explicit contracts are seldom exercised, even though violations take place and are easy to monitor and verify.

Procurement Contracting Stategies

Quality and suppliers performance are essential for procurement. This Paper analyses these important issues from two perspectives. The first part deals with the topic of contracting. It describes the features of some common types of contracts that the buyer may choose according to the circumstances of the procurement. The central issue is how the procurer should choose and then design the contract to optimally balance the trade-off between incentives to limit the contractors supply cost and the flexibility to ex-post adaptation to potential unforeseen events. When important characteristics of the supply cannot be easily described in - and enforced within - the contract, the procurer must use other tools to ensure successful procurement. The second part of the Paper deals with this important problem, also known as non-contractible quality. The part provides indications about the methods the procurer may use to obtain adequate quality and customer satisfaction and illustrates which method seems to fit better in the specific procurement context.

Building Reputation for Contract Renewal: Implications for Performance Dynamics and Contract Duration

Due to technological progress, recent performance is often more informative about future performance prospects than is older performance. We incorporate information decay in a career concern model in which performance depends on type and effort and contract renewal is based on the performance record. In contrast with the career concern literature (e.g. Lewis, 1986; RJE), contractors work harder when the project approaches renewal date and when their reputation is better. Productive investment are crowded out by window-dressing effort in late contract periods, but it is boosted in early periods. More frequent contract renewals strengthen reputational effects and result in improved performance if the relative cost of investment is low, but otherwise long-term contracts induce more effort. Our results are corroborated by some empirical studies showing that performance improves as the contract approaches renewal date.

Reputational Concerns in Arbitration: Decision Bias and Information Acquisition

We analyze how reputational concerns of arbitrators affect the quality of their decision process, in particular, information acquisition and bias. We assume that arbitrators differ in their ability to observe the state of the world and that information acquisition is costly and unobservable. We show that reputational concerns increase incentives for information acquisition but may induce arbitrators to bias their decisions towards one party in the dispute. This decision bias is greater when the dispute proceedings are confidential rather than public. Building on these results, we study the circumstances under which the parties to a contract choose to employ arbitration rather than litigation in court to resolve their disputes.

Price cap regulation, revenue sharing and information acquisition☆

Abstract We study the incentives of regulated firms to acquire costly information under price cap regulation. We show that revenue sharing plans, in the spirit proposed by Sappington and Weisman [Inf. Econ. Policy 8 (1996) 229], can provide greater incentives for information acquisition than pure price capping and increase social welfare.

BUILDING REPUTATION FOR CONTRACT RENEWAL: IMPLICATIONS FOR PERFORMANCE DYNAMICS AND CONTRACT DURATION

We study how career concerns affect the dynamics of incentives in a multi-period contract, when the agents productivity is a stochastic function of his past productivity and investment. We show that incentives are stronger and performance is higher when the contract approaches its expiry date. Contrary to common wisdom, long-term contracts may strengthen reputational effects whereas short-term contracting may be optimal when investment has persistent, long-term effects.

Post-Tender Corruption and Risk Allocation:Implications for Public-Private Partnerships

Whilst a lot has been said about how to fight corruption at tender stage in public procurement, post-tender corruption is an issue that remains almost unexplored. In this paper, we make a step towards filling this gap, by studying the relationship between the quality of a countrys institutions, in particular its monitoring technologies and corruption, and the level and form of risk transfer to the contractor. We discuss the desirability of state-contingent clauses, which provide insurance to the contractor but are at high risk of manipulation. We derive implications on the benefit and cost of procurement forms which are based on high levels of risk transfer to the private sector, such as Public Private Partnerships (PPPs).