Since this can be higher than the cheapest solution, market asymmetry also reduces the set of possible contracts. Finally, as the last step of extending the Deadline Game, we introduced a third party as a guarantor. He also plays a two-stage game with one of the actors. Due to the very character of the subgame, namely overcentralization, sequentiality, and moral hazard, he proves to be unable to protect himself against fait accompli type of situations. The relatively big size of the third party, in case of centrally planned economies it is the state, the first-mover disadvantage and monitoring problems make the contract partner able to force the government to provide excess resources.
Budget constraints become soft.
It is spending that creates budgets instead of the other way around. Soft budget constraints are produced by overcentralization, which excludes one of the major tools of protection of the third party. Beyond a limit, lobbying would be more costly than beneficial from the point of view of the lobbyist, since budget constraints of the government would become too tough. Comparing costs and benefits of procurement gives a chance to pinpoint the optimal amount devoted to procurement and also a sort of shutdown condition that would give the limit beyond which lobbying would create higher costs than benefits. The two shutdown conditions which serve as lowerbound conditions of contracting in this context, allowed us to make a comparative cost analysis of different methods of managing contracts.