Simple Cost-Sharing Contracts

摘要

Economic guidance can be of substantial value to policymakers in principle. However, guidance delivered in the form of complex formulae and detailed mathematical characterizations of optimal policies may not be fully appreciated or warmly embraced. Consequently, insights like those of William Roger-son (2003) are particularly important. Rogerson demonstrates in a plausible setting that a pair of simple procurement contracts can secure a surprisingly large fraction (at least three-fourths) of the surplus that a fully optimal contract can secure. The two simple contracts are a fixed-price (FP) contract and a cost-reimbursement (CR) contract. Under an FP contract, the supplier is paid a fixed price for delivering the good in question, regardless of the supplier's realized production costs. Under a CR contract, the supplier is reimbursed exactly for all realized costs.