Pastor Vicedo, Ruben (2012) Optimal procurement with auditing and bribery. PhD thesis, University of Warwick.

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Abstract

In this thesis I characterise an optimal procurement contract for a government
that purchases a good or service from a firm that has private information
about its cost of production (its type) when the government has available the
reports of a corruptible internal auditor and an honest but less well informed
external auditor.
In chapter 2 I assume that the government is constrained to offer the
internal auditor a contract that consists of a penalty if the external auditor
obtains evidence of misreporting. For the case of two cost types I show that an
optimal contract exhibits a separation property: the government gives priority
to achieving the first best (no private information) expected profit scheme over
demanding the first best quantity scheme. For the case of a continuum of cost
types I provide sufficient conditions under which this result is valid.
In chapter 3 I allow the government to offer the internal auditor a contract
that consists of a transfer, a reimbursement and a penalty. For the situation
in which bribery takes place after the firm makes a claim about its type I
demonstrate that the government can achieve the outcome of the first best
contract if the sum of the expected penalties is positive and for every type of
the firm the distribution of the outcome of the audit is not the same as that
of the adjacent type. For the situation in which bribery takes place before the
firm makes a claim about its type I argue that the contract design problem is
the same as in chapter 2 and I prove that if the sum of the expected penalties
does not depend on the extent of the misreporting then in an optimal contract
bribery does not take place.

Item Type:	Thesis or Dissertation (PhD)
Subjects:	H Social Sciences > HD Industries. Land use. Labor
Library of Congress Subject Headings (LCSH):	Industrial procurement, Public contracts, Auditing, Bribery
Official Date:	September 2012
Dates:	Date Event September 2012 Submitted
Institution:	University of Warwick
Theses Department:	Department of Economics
Thesis Type:	PhD
Publication Status:	Unpublished
Supervisor(s)/Advisor:	Mezzetti, Claudio; Sgroi, Daniel
Sponsors:	University of Warwick. Department of Economics; Fundación Ramón Areces
Extent:	vii, 83 leaves.
Language:	eng

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