- I am interested in firms' performance and related effects on consumer welfare under different market settings, proper... moreI am interested in firms' performance and related effects on consumer welfare under different market settings, property rights and rules/incentives, primarily where government intervention plays a role.edit
We use a statistical micro matching procedure to obtain a synthetic dataset to investigate the risk of fuel poverty in small areas. Specifi cally, we link 19,174 homes with Energy Performance Certi cates (EPCs) in the Italian province of... more
We use a statistical micro matching procedure to obtain a synthetic dataset to investigate the risk of fuel poverty in small areas. Specifi cally, we link 19,174 homes with Energy Performance Certi cates (EPCs) in the Italian province of Treviso with information - from the Census and Household Budget Survey - about the socioeconomic features of the families that most likely inhabit them. Based on this original dataset, we find that poor housing is as important as low income and the use of
natural gas in determining fuel poverty. In particular, the risk of fuel poverty is increased by i) the energy inefficiency of the home; ii) the size of the home in relation to household size; iii) the lower total household expenditure. Conversely, the risk decreases when the main heating is natural gas and/or the home is endowed with renewable energy sources.
Our results show that information in EPCs, matched at the micro level with the socio-economic data usually available from administrative sources or surveys, can be used to identify - on the one hand - the individual households and the municipal areas risking fuel poverty, and - on the other - the most effective policy options to tackle the phenomenon.
natural gas in determining fuel poverty. In particular, the risk of fuel poverty is increased by i) the energy inefficiency of the home; ii) the size of the home in relation to household size; iii) the lower total household expenditure. Conversely, the risk decreases when the main heating is natural gas and/or the home is endowed with renewable energy sources.
Our results show that information in EPCs, matched at the micro level with the socio-economic data usually available from administrative sources or surveys, can be used to identify - on the one hand - the individual households and the municipal areas risking fuel poverty, and - on the other - the most effective policy options to tackle the phenomenon.
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This paper investigates the price variability of standardized medical devices purchased by Italian Public Buyers (PBs). A semiparametric approach is used to recover the marginal cost of each device. Average prices vary substantially... more
This paper investigates the price variability of standardized medical devices purchased by Italian Public Buyers (PBs). A semiparametric approach is used to recover the marginal cost of each device. Average prices vary substantially between PBs; we show that most of the difference between the purchase prices and estimated costs is associated with a PB fixed effect, which, in turn, is related to the institutional characteristics and size of the PB. Repeating the main estimation using device fixed effects yields similar results. Finally, an exogenous policy change, i.e. the termination of the mandatory reference price regime, is used to assess how discretion affects medical device procurement given the skills of each PB. Our results show that less PB discretion-i.e. when mandatory reference prices apply-determines efficiency gains and losses for low-and high-skilled PBs, respectively.
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We empirically investigate incumbents' and entrants' bids on an original dataset of 192 scoring rule auctions for canteen services in Italy. Our findings show that winning rebates are lower (i.e., prices paid by the public buyer are... more
We empirically investigate incumbents' and entrants' bids on an original dataset of 192 scoring rule auctions for canteen services in Italy. Our findings show that winning rebates are lower (i.e., prices paid by the public buyer are higher) when the contract is awarded to the incumbent supplier. This result is not explained by the observable characteristics of the auction or the service awarded. We develop a simple theoretical model showing that the result is consistent with a setting in which the buyer exploits specific information on the incumbent supplier's production cost. JEL codes: D44, D47, H57, L88.
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We empirically compare bids (i.e. prices) from temporary partnerships (TPs) that outsource part of the contract before the auction and firms that outsource afterwards. Using a comprehensive dataset on procurement auctions for public works... more
We empirically compare bids (i.e. prices) from temporary partnerships (TPs) that outsource part of the contract before the auction and firms that outsource afterwards. Using a comprehensive dataset on procurement auctions for public works in Valle d'Aosta (Italy), we find that the timing of outsourcing affects the bids and the probability of winning the auction. Specifically, TPs bid closer to the payoff maximizing offer and are more likely to win. Hence, the price paid by the public buyer is lower. These results are supported by a simple theoretical setting showing that, by pre-committing to a TP, suppliers have a lower risk of being "held up" by subcontractors than firms that outsource part of the work after the bidding phase. Our results show the advantage for TPs of freely choosing partners, size and boundaries before the auction, highlighting their potential in fostering the effective participation in public procurement procedures of Small and Medium-sized Enterprises (SMEs).
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On a large dataset of Italian municipalities for the period 2003-2014, we investigate unexplored effects of fiscal consolidation in decentralized public finance. Based on a simple, realistic theoretical model, we show that municipalities... more
On a large dataset of Italian municipalities for the period 2003-2014, we investigate unexplored effects of fiscal consolidation in decentralized public finance. Based on a simple, realistic theoretical model, we show that municipalities increase arrears on committed public investment expenditure as a response to intergovernmental transfer cuts. Then, we test our predictions controlling for potential sources of endogeneity, and find that a reduction in central government transfers causes a significant increase in arrears, besides other usual adjustments to local fiscal policy (e.g., tax revenues). Our results highlight a perverse effect of fiscal consolidation packages implemented by centrally imposed fiscal restraints.
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We study bidding behavior by firms in beauty-contest auctions, i.e. auctions in which the winning bid is the one which gets closest to some function (average) of all submitted bids. Using a dataset on public procurement beauty-contest... more
We study bidding behavior by firms in beauty-contest auctions, i.e. auctions in which the winning bid is the one which gets closest to some function (average) of all submitted bids. Using a dataset on public procurement beauty-contest auctions, we show that firms' observed bidding behavior departs from equilibrium and can be predicted by a sophistication index, which captures the firms' capacity of bidding close to optimality in the past. We show that our empirical evidence is consistent with a Cognitive Hierarchy model of bidders' behavior. We also investigate whether and how firms learn to bid strategically through experience. We are indebted to Francesco Decarolis for providing us with his codes. We would like to thank for their valuable comments:
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Disputes over penalties for breaching a contract are often resolved in court. A simple model illustrates how inefficient courts can sway public buyers from enforcing a penalty for late delivery in order to avoid litigation, thereby... more
Disputes over penalties for breaching a contract are often resolved in court. A simple model illustrates how inefficient courts can sway public buyers from enforcing a penalty for late delivery in order to avoid litigation, thereby inducing sellers to delay contract delivery. By using a large dataset on Italian public procurement, we empirically study the effects of court inefficiency on public work performance. Where courts are inefficient, we find the following: public works are delivered with longer delays; delays increase for more valuable contracts; contracts are more often awarded to larger suppliers; and a higher share of the payment is postponed after delivery. Other interpretations receive less support from the data.
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We discuss public procurement instruments for acquiring innovation, focusing on the European Pre-commercial Procurement, Procurement of Innovative Solutions and Innovation Partnerships. We analyse in particular how firms’ innovation... more
We discuss public procurement instruments for acquiring innovation, focusing on the European Pre-commercial Procurement, Procurement of Innovative Solutions and Innovation Partnerships. We analyse in particular how firms’ innovation incentives are affected by: (i) economies of scope and externalities between R&D and large-scale production; (ii) the degree of specificity of the innovation; (iii) the presence of Small and Medium Enterprises (SMEs) in the market and the level of market competition; (iv) the risk of market foreclosure and supplier lock-in. Our study contributes to the literature on incentives in demand-side innovation policy by tapping into the contractual design features and by offering relevant implications for academics and policy makers. (107 words)
Keywords: Innovation, Demand-side policies, Incentives, Pre-commercial Procurement, Public Procurement of Innovative Solutions, Innovation Partnership, Bundling, Rationales.
JEL Code: O31; O32; O38; H57.
Keywords: Innovation, Demand-side policies, Incentives, Pre-commercial Procurement, Public Procurement of Innovative Solutions, Innovation Partnership, Bundling, Rationales.
JEL Code: O31; O32; O38; H57.
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We present results from an experiment with multiple public goods, where each good produces benefits only if total contributions to it reach a minimum threshold. The presence of multiple public goods makes coordination among participants... more
We present results from an experiment with multiple public goods, where each good produces benefits only if total contributions to it reach a minimum threshold. The presence of multiple public goods makes coordination among participants more difficult, discouraging donor participation and decreasing the likelihood of any public good being effectively funded. Applied to the case of fundraising, the results show how overall donations and the number of effectively funded projects may both decrease as the total number of projects vying for funding increases.
The analysis considers whether making one of the contribution options salient, either through its merits or by arbitrarily choosing one to feature during the experiment, helps overcome the increased coordination problem. The results have implications for the growing popularity of crowdfunding websites, and suggest benefits to these sites from helping donors compare and identify the most promising projects.
The analysis considers whether making one of the contribution options salient, either through its merits or by arbitrarily choosing one to feature during the experiment, helps overcome the increased coordination problem. The results have implications for the growing popularity of crowdfunding websites, and suggest benefits to these sites from helping donors compare and identify the most promising projects.
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Using a newly assembled dataset, we empirically investigate the effects of subcontracting on procurement auction prices in Italy. In this setting, the pre-qualifications required for firms aiming to bid on public contracts determine the... more
Using a newly assembled dataset, we empirically investigate the effects of subcontracting on procurement auction prices in Italy. In this setting, the pre-qualifications required for firms aiming to bid on public contracts determine the firms’ different subcontracting formats. We find that fully qualified firms in a position to choose whether to subcontract generally offer lower prices than partially qualified firms, which must proceed with mandatory subcontracts. This result indicates that the firms’ voluntary arrangements tend to improve market performance, while imposed arrangements tend to worsen market performance, in the public procurement supply-chain.
The paper provides a discussion of alternative measure of energy affordability. We examine the emergence of fuel poverty in Italy from 1998 to 2011. We assess the appropriateness of the Italian energy benefits eligibility criteria. A... more
The paper provides a discussion of alternative measure of energy affordability. We examine the emergence of fuel poverty in Italy from 1998 to 2011. We assess the appropriateness of the Italian energy benefits eligibility criteria. A simulation shows that the energy benefits have little impact on fuel poverty. a b s t r a c t In this paper, we discuss a number of ways to define and measure the affordability of energy consumption, and we examine the emergence of energy poverty in Italy in the period from 1998 to 2011. The paper examines the eligibility criteria for claiming the benefits available to support energy consumption for vulnerable families and it identifies the potential beneficiaries. The study assesses the appropriateness of the eligibility criteria by comparing the population targeted by the policy with the population actually facing affordability problems. A simulation exercise, using the hypothetical scenario most likely to result in energy benefits being made available, shows that, regardless of the affordability index adopted, the provision of state energy benefits has little impact on fuel poverty.
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Using an original database for the 1992–2008 period, we investigate the determinants of state aid to the automotive industry in the European Union (EU). We find evidence that EU policies have been effective in reducing state aid and... more
Using an original database for the 1992–2008 period, we investigate the determinants of state aid to the automotive industry in the European Union (EU). We find evidence that EU policies have been effective in reducing state aid and re-orientating it toward horizontal objectives. However, national politics still have considerable relevance. During election years, governments are more generous, and this is particularly true in EU countries with proportional representation. Finally, a strategic game between countries seems to take place, whereby a country’s decision to grant aid seems to be responsive to aid previously granted by other member states.
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In this paper we analyse some distributional effects of the reforms of water and energy services in Italy. We first document the new regulation setting in these services, illustrating the dynamics of utility prices and of household... more
In this paper we analyse some distributional effects of the reforms of water and energy services in Italy. We first document the new regulation setting in these services, illustrating the dynamics of utility prices and of household expenditure in the period 1998-2005. We then propose a way to measure the affordability of public utilities, in order to investigate how many
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In this paper we analyse the affordability of water and energy for Italian households. We first document how the regulatory reform has changed the system of price setting, illustrating the dynamics of utility prices and of household... more
In this paper we analyse the affordability of water and energy for Italian households. We first document how the regulatory reform has changed the system of price setting, illustrating the dynamics of utility prices and of household expenditure in the period 1998-2005. We then discuss current indices adopted to measure the affordability of public utilities and propose an alternative one, in order to investigate how many households would incur a potentially excessive burden, if they consumed a minimum quantity of utility services. Finally, we calculate the values of these indices on data from the ‘Survey on Family Budgets’ over the period, and use them to depict the affordability issue in Italy. Our results show that after the Italian reforms of the Nineties (at least until 2005) the affordability of public utility services has not worsened.
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The method for settling telecommunications payments between operators in different countries is the reciprocal accounting rate system. This is a discriminatory system, because different operators pay different prices to access the same... more
The method for settling telecommunications payments between operators in different countries is the reciprocal accounting rate system. This is a discriminatory system, because different operators pay different prices to access the same national network and these price differences are not related to different costs of providing the service. Reforms of the accounting rate system are currently under discussion in international organizations. In this paper we study the effects of the existing regime and of the main alternative proposal, the international traffic terminating fee, on the retail price of international telephone calls. Our main result is that the current regime of reciprocal accounting rates may determine lower prices than the proposed alternative system.
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In this paper, we investigate how tightening fiscal constraints (e.g., through intergovernmental transfer cuts) can lead local governments to postpone investment payments. We first provide a simple model showing how local governments can... more
In this paper, we investigate how tightening fiscal constraints (e.g., through intergovernmental transfer cuts) can lead local governments to postpone investment payments. We first provide a simple model showing how local governments can use arrears to relax their short-run financial constraints. We then empirically assess our theoretical prediction using information from accounting and financial reports from all Italian municipalities for the period 2003-2010. Exploiting the long-lasting effect of the 1977-1978 structural reform of Italian local public finance, we employ an instrumental variable approach to face endogeneity concerns. We find robust empirical evidence that the tighter the local government's fiscal and financial conditions, the larger the arrears in public investment expenditures.
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This paper compares the organisation of the university sector under unregulated private provision with the structure which would be chosen by a welfare maximising government. It studies a general equilibrium model where students attend... more
This paper compares the organisation of the university sector under unregulated private provision with the structure which would be chosen by a welfare maximising government. It studies a general equilibrium model where students attend university to earn higher incomes in the labour market, and universities teach them and carry out research. Each university chooses its tuition fee to maximise the amount of resources it can devote to research. Research bestows an externality on society. Government intervention needs to balance labour market efficiency considerations – which would tend to equalise the number of students attending each university – with considerations of efficiency on the production side, which suggest that the most productive universities should teach more students and carry out more research. We find that government concentrates research more that the private marketwould, but less than it would like to do if it had perfect information about the productivity of universities. It also allows fewer universities than would operate in a private system.
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To avoid the extremely high profit levels found in recent experiences with price cap regulation, some regulators have proposed a profit-sharing mechanism that revises prices to the benefit of consumers. This paper investigates the... more
To avoid the extremely high profit levels found in recent experiences with price cap regulation, some regulators have proposed a profit-sharing mechanism that revises prices to the benefit of consumers. This paper investigates the conditions under which a regulator can implement such a profit-sharing scheme, having the option to revoke the contract if the firm's profits are excessive. When this option is included in the regulator's objective function and the cost of exercising it is not too high, a long-term equilibrium arises with a state-contingent sharing rule that guarantees and appropriate level of profits. The model determines both the level of profits that triggers the profit- sharing mechanism and the consequent price adjustment endogenously. There is an endogenous regulatory lag initially characterized by a price cap regulation, followed by a period of profit-sharing regime where the firm is motivated to cut prices to avoid revocation.
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L’acqua è un bene pubblico essenziale in grado di generare una pluralità di domande spesso in concorrenza tra loro. Sebbene l’obiettivo di assicurare un accesso alla risorsa non subordinato alla “ability to pay” rimanga uno dei principi... more
L’acqua è un bene pubblico essenziale in grado di generare una pluralità di domande spesso in concorrenza tra loro. Sebbene l’obiettivo di assicurare un accesso alla risorsa non subordinato alla “ability to pay” rimanga uno dei principi cardine dell’offerta, la riforma italiana del servizio idrico – avviata a partire dalla Legge Galli 36/1994 - configura una gestione industriale su larga
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Using a dataset of medical devices purchased by Italian Public Buyers (PBs), for each purchase, we measure the difference between each item's price and its marginal cost. We define PBs' ability in purchasing as PBs' fixed... more
Using a dataset of medical devices purchased by Italian Public Buyers (PBs), for each purchase, we measure the difference between each item's price and its marginal cost. We define PBs' ability in purchasing as PBs' fixed effect (FE) on that difference. We find that average prices vary substantially amongst PBs, and this variation is largely captured by PBs' FE. We then exploit the exogenous termination of the mandatory reference price regime to assess how discretion affects procurement performance, given each PB's ability. Our results highlight that reduced PBs' discretion - in presence of mandatory prices - determines efficiency gains and losses for low- and high-ability PBs, respectively.
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We study bidding behavior by firms in beauty-contest auctions, i.e., auctions in which the winning bid is the one which gets closest to some function (average) of all submitted bids. Using a dataset on public procurement beauty-contest... more
We study bidding behavior by firms in beauty-contest auctions, i.e., auctions in which the winning bid is the one which gets closest to some function (average) of all submitted bids. Using a dataset on public procurement beauty-contest auctions, we show that firms' observed bidding behavior departs from equilibrium and can be predicted by a "sophistication" index, which captures the firms' capacity of bidding close to optimality in the past. We show that our empirical evidence is consistent with a Cognitive Hierarchy model of bidders' behavior. We also investigate whether and how firms learn to bid strategically through experience.
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We present a model of the impact of state aid on equilibrium market structure and on market performance in an integrating market when the process of integration is driven by consumer inertia. In a partial equilibrium model, it is an... more
We present a model of the impact of state aid on equilibrium market structure and on market performance in an integrating market when the process of integration is driven by consumer inertia. In a partial equilibrium model, it is an equilibrium for governments to grant state aid, even though this reduces common market welfare.
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We run an experiment on procurement auctions in a setting where both quality and price matter. We compare two unidimensional treatments in which the buyer fixes one dimension (quality or price) and sellers compete on the other, with three... more
We run an experiment on procurement auctions in a setting where both quality and price matter. We compare two unidimensional treatments in which the buyer fixes one dimension (quality or price) and sellers compete on the other, with three bidimensional treatments (with different strategy spaces) in which sellers submit a price-quality bid and the winner is determined by a score that linearly combines the two offers. We find that, with respect to the theoretical predictions, the bidimensional treatments significantly underperform, both in terms of efficiency and buyer's utility. We attribute this result to the higher strategic complexity of these treatments and test this intuition by fitting a structural Quantal Response Equilibrium model with risk aversion to our experimental data. We find very similar estimates for the risk aversion parameter across all treatments; instead, the error parameter, which captures deviations between the observed bids and the payoff-maximizing ones, ...
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By exploiting an original 4-year dataset on the Italian retail electricity market, we investigate the relationship between firm incumbency — measured by market concentration at the regional level — and consumer inertia — identified by the... more
By exploiting an original 4-year dataset on the Italian retail electricity market, we investigate the relationship between firm incumbency — measured by market concentration at the regional level — and consumer inertia — identified by the yearly percentage of consumers switching providers and/or contract, both from the regulated to the free market and within the free market. Our main results show that i) regions recording stronger firm incumbency exhibit larger consumer inertia in leaving the regulated market, this effect being reinforced by the number of active free market retailers; ii) switching by consumers who already are in the free market is, instead, positively affected by firm incumbency. In light of these results, we provide prescriptions for policymakers targeting the migration of consumers towards free-market contracts and, consequently, full energy market liberalisation.
We use the nearest neighbour propensity score matching to link dwellings holding Energy Performance Certificates (EPCs) in the Italian province of Treviso with information on the socio-economic characteristics of households most likely to... more
We use the nearest neighbour propensity score matching to link dwellings holding Energy Performance Certificates (EPCs) in the Italian province of Treviso with information on the socio-economic characteristics of households most likely to inhabit them. We construct a database of 17,405 dwellings for which information on standardized energy needs is matched to data on (potential) inhabitants and their imputed income, based respectively on census records and survey data. Our analysis shows that EPC registers can be exploited to investigate how income and housing conditions affect fuel poverty and to identify municipal areas with higher fuel poverty risk. Our findings highlight that when designing interventions to reduce fuel poverty, policymakers should target households based not only on their income but also on type of heating fuel, and on efficiency and the size of their accommodation. (135 words) JEL CODE: C21; I32; Q48.
We empirically study the relationship between oil price uncertainty and conflict incidence by using different Vector Auto-Regressive (VAR) models, also augmented with Heterogeneous (VHAR) components. We build two measures for oil price... more
We empirically study the relationship between oil price uncertainty and conflict incidence by using different Vector Auto-Regressive (VAR) models, also augmented with Heterogeneous (VHAR) components. We build two measures for oil price uncertainty and investigate the Middle East and North Africa (MENA) interstate conflict, civil conflict and terrorist attacks data. Our results show that uncertainty in the oil market increases the incidence of conflict in the region. By further decomposing the model for OPEC and non-OPEC members of the region, we find that while the OPEC members immunise themselves against conflict, oil price uncertainty affects the conflict in non-OPEC members positively.
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We empirically investigate incumbents’ and entrants’ bids on an original dataset of 192 scoring rule auctions for canteen services in Italy. Our findings show that winning rebates are lower (i.e., prices paid by the public buyer are... more
We empirically investigate incumbents’ and entrants’ bids on an original dataset of 192 scoring rule auctions for canteen services in Italy. Our findings show that winning rebates are lower (i.e., prices paid by the public buyer are higher) when the contract is awarded to the incumbent supplier. This result is not explained by the observable characteristics of the auction or the service awarded. We develop a simple theoretical model showing that the result is consistent with a setting in which the buyer exploits specific information on the incumbent supplier’s production cost.
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Research Interests: Economics, Public Finance, Econometrics, Macroeconomics, Fiscal Federalism, and 11 moreApplied Economics, Revenue, Instrumental Variable, Fiscal rules, Instrumental Variables, Endogeneity, Economic Modelling, Tax Revenue, Expenditure commitments, Finance and Investment Banking Area, and Finance and Investment Banking
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Abstract We empirically compare bids (i.e. prices) from temporary partnerships (TPs) that outsource part of the contract before the auction and firms that outsource afterwards. Using a comprehensive dataset on procurement auctions for... more
Abstract We empirically compare bids (i.e. prices) from temporary partnerships (TPs) that outsource part of the contract before the auction and firms that outsource afterwards. Using a comprehensive dataset on procurement auctions for public works in Valle d’Aosta (Italy), we find that the timing of outsourcing affects the bids and the probability of winning the auction. Specifically, TPs bid closer to the payoff maximizing offer and are more likely to win. Hence, the price paid by the public buyer is lower. These results are supported by a simple theoretical setting showing that, by pre-committing to a TP, suppliers have a lower risk of being “held up” by subcontractors than firms that outsource part of the work after the bidding phase. Our results show the advantage for TPs of freely choosing partners, size and boundaries before the auction, highlighting their potential in fostering the effective participation in public procurement procedures of Small and Medium-sized Enterprises (SMEs).
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We empirically study the relationship between oil price uncertainty and conflict incidence by using different VectorAuto-Regressive (VAR) models, also augmented with Heterogeneous (VHAR) components.We build two measures for oil price... more
We empirically study the relationship between oil price uncertainty and conflict incidence by using different VectorAuto-Regressive (VAR) models, also augmented with Heterogeneous (VHAR) components.We build two measures for oil price uncertainty and investigate the Middle East and North Africa (MENA) interstate conflict, civil conflict and terrorist attacks data.Our results show that uncertainty in the oil market increases the incidence of conflict in the region. By further decomposing the model for OPEC and non-OPEC members of the region, we fi nd that while the OPEC members immunise themselves against conflict, oil price uncertainty affects the conflict in non-OPEC members positively.
Government support to small business enterprises (SBEs) through set-aside (SA) public procurement auctions is a common practice. The effect of the SA mechanism is, however, ambiguous. On the one hand, SA auctions can attract more SBEs to... more
Government support to small business enterprises (SBEs) through set-aside (SA) public procurement auctions is a common practice. The effect of the SA mechanism is, however, ambiguous. On the one hand, SA auctions can attract more SBEs to compete; on the other hand, SA auctions restrict the entry of—possibly—more cost-efficient large firms. We investigate SA auctions’ effect by exploiting an original Russian database on public procurement e-auctions for granulated sugar (a largely homogeneous good) in the period 2011-2013. To identify the causal effect of SA auctions, we overcome two endogeneity issues: procurers’ choice of SA format and firms’ decision to bid. In an empirical setting where confounding elements are minimized, we found that SA auctions’ effect largely depends on both the reserve price value and the level of competition. We found that there exists an optimal interval for the reserve price where SA auctions record lower procurement prices, as compared to non-SA auctions.
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This paper concerns "profit-sharing" within an incomplete regulatory contract where a municipality delegates a risk-neutral firm to manage a local utility. Together with a price cap regulation (PCR) mechanism, the contract... more
This paper concerns "profit-sharing" within an incomplete regulatory contract where a municipality delegates a risk-neutral firm to manage a local utility. Together with a price cap regulation (PCR) mechanism, the contract envisages the possibility of the municipality revoking the contract if the firm's profits are percieved "excessively" high. We show that when this threat is credible and the cost of exercising it is not too high, a long-term efficient equilibrium arises which guarantees the firm with an appropriate level of profits. The consequent regulation timing consists of an endogenous regulatory lag where the regulation has a PCR nature, followed by a period of ROR in which the firm is motivated to adjust its price downward to avoid contract recall. We also show that excessive revocation costs make the firm an unregulated monopolist with an infinite regulatory lag where ROR looks like a pure PCR.
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We have assembled a new dataset and we have empirically investigated the effects of subcontracting on the bidding price in auctions for the awarding of public contracts in Italy. The required qualification for firms aiming to bid for... more
We have assembled a new dataset and we have empirically investigated the effects of subcontracting on the bidding price in auctions for the awarding of public contracts in Italy. The required qualification for firms aiming to bid for Italian public contracts determines different subcontracting formats: according to this system, bidding firms can be classified as either partially or fully qualified to complete a tendered project. The former are obliged to allocate certain tasks involved in the contract to other qualified firms, giving rise to a OmandatoryO subcontracting. The latter are free to choose whether or not to subcontract some tasks to similarly qualified firms, adopting an OoptionalO subcontracting. We find that firms in a position to choose whether to subcontract or not generally offer lower prices than those firms which must proceed with mandatory subcontracts. This result, which holds true after controlling for auction characteristics, firmsO fixed effects, and character...
Using a dataset of medical devices purchased by local Public Buyers (PBs), for each purchase we measure the difference between each item’s price and its marginal cost. We define PBs’ability in purchasing as PBs’fixed effect (FE) on that... more
Using a dataset of medical devices purchased by local Public Buyers (PBs), for each purchase we measure the difference between each item’s price and its marginal cost. We define PBs’ability in purchasing as PBs’fixed effect (FE) on that difference. Average prices vary substantially amongst PBs, and this variation is largely captured by PBs’FE. We then exploit in such dataset the exogenous termination of the mandatory reference price regime to assess how discretion affects procurement performance, given each PB’s ability. We found that reduced PBs’ discretion determines effi ciency gains and losses for lowand high-ability PBs, respectively. JEL Classification: D44; D73; H57; I18.
Procurement (and concession) contracts are agreements granting the right to construct public works, operate and provide a service/good. The main advantage of a procurement contract is that it passes full responsibility for investment and... more
Procurement (and concession) contracts are agreements granting the right to construct public works, operate and provide a service/good. The main advantage of a procurement contract is that it passes full responsibility for investment and operations to the private sector and consequently provides incentives for efficiency. Although most contracts include penalty/premium clauses to avoid construction risks (i.e. delays), evidence from ongoing procurement contracts shows that there are many delays in making investments. Actually these clauses introduce the flexibility to decide when it is optimal to invest and consequently increase the contract’s value for the contractor. Therefore if the contracting authority underestimates penalty/premium fees, these may be totally ineffective in avoiding construction risks. In this paper we specifically investigate the effects that penalty/premium clauses have on both contract value and reduction of delay. We also focus on the design of optimal pena...
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This paper studies the impact of qualification rules for entry into public procurement auctions on firm bids and contract execution (time and cost overruns). Using comprehensive and detailed microdata on all public work contracts awarded... more
This paper studies the impact of qualification rules for entry into public procurement auctions on firm bids and contract execution (time and cost overruns). Using comprehensive and detailed microdata on all public work contracts awarded by the regional government of Valle d’Aosta from 2000 to 2008, we investigate the differences between bids by temporary partnerships (TPs) that outsource before the auction and firm that subcontract, optionally or mandatorily, after the auction (in case they win). We find that the timing of outsourcing, contract complexity and firm size affect bids and the probability of time and cost overruns. TPs bid lower prices than mandatory and large optional firms and are less likely to exceed execution costs. However, TPs appear slower than optional and mandatory firms to deliver on time, revealing a problem in coordination among partners. Our results highlight the TPs’ advantage of freedom in choosing economic size and technical boundaries before entering t...
We present a model of the impact of state aid on equilibrium market structure and on market performance in an integrating market when the process of integration is driven by consumer inertia. In a partial equilibrium model, it is an... more
We present a model of the impact of state aid on equilibrium market structure and on market performance in an integrating market when the process of integration is driven by consumer inertia. In a partial equilibrium model, it is an equilibrium for governments to grant state aid, even though this reduces common market welfare.