Pierre-Henri Morand

On Non-responsiveness in Adverse Selection Models with Common Value

In common value models, it is possible that the full information efficiency and the incentive constraint require the quantity of full and asymmetric information to move in opposite directions with the type. This conflict is called non-responsiveness. Most of those models share the features that when there is conflict, the optimal contract is pooling otherwise it is separating. In this note, we will show that, in fact, the robustness of the links between the conflict and separating contracts is not a general consequence of the common value models: it depends crucially on the assumption made in all those models that the principals marginal benefit from trade with full information is not distorted by the presence of informational rents.

Pre vs. post-award subcontracting plans in procurement bidding

Abstract We show how the timing of the subcontracting decision affects subcontracting levels, bidding strategies and expected total cost of procurement contracts, considering that bidders face a trade-off between subcontracting rents and expected change orders when choosing the subcontracting level.

Free Riding in Combinatorial first-price sealed-bid Auctions

We consider an allotted procurement contract awarded by means of a combinatorial first-price sealed-bid auction. Two small firms and a larger firm are competing. Each small firm is interested in a single lot whereas the large firm transmits a global offer. Under a specific informational framework, we derive the asymmetric combinatorial equilibrium bidding strategies and show that they exhibit a free-riding effect. We show that this effect is increasing with the level of uncertainty and decreasing with risk aversion. When all the firms are risk neutral or equally risk averse, the magnitude of the free-riding effect is unaffected by the division of the contract chosen by the public buyer. Nevertheless, when each firm exhibits its own risk aversion parameter, we find that the free-riding effect is reduced (resp. increased) as the more risk averse small firm competes for a larger (resp. smaller) part of the contract.

The choice of the voting structure for privatizing a company

We study the role of security-voting structure when a government wants to privatize a company. Our results show that the one share–one vote structure is optimal for allocating control rights to the most efficient pretender. However, this structure is not always optimal for maximizing the sale’s revenue.