Incentives and adaptation
Subtitle: evidence from highway procurement in Minnesota
By: Gregory Lewis, Patrick Bajari
Contributors: Bajari, Patrick L.; National Bureau of Economic Research
Series: NBER working paper series -- working paper 17647; Working paper series (National Bureau of Economic Research : Online) -- working paper no. 17647.
Publisher: National Bureau of Economic Research
Published: 2011
Place of publication: Cambridge, MA
Language: eng
Format: Electronic resource
Description: "Procurement projects often encounter unanticipated problems.  Deadlines and penalties are one important instrument used to incentivize contractors to adapt their plans.  We develop a theory of highway procurement in which contractors must modify their construction rate following a productivity shock.  We model how time incentives affect the work rate and time taken, characterizing the efficient contract design.  Using new micro-level data from Minnesota that includes day-by-day information on work plans, actual outcomes and delays, we find strong evidence supporting the theory.  As an application, we build an econometric model that endogenizes adaptation, and simulate how different incentive structures affect outcomes and the variance of contractor payments.  Accounting for the traffic delays caused by construction, switching to a more efficient design would substantially increase welfare without substantially increasing risk"--National Bureau of Economic Research web site.
Notes: Title from PDF file as viewed on 2/14/2012.

Includes bibliographical references.

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