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.
| Identifer | oai:union.ndltd.org:bl.uk/oai:ethos.bl.uk:582309 |
| Date | January 2012 |
| Creators | Pastor Vicedo, Ruben |
| Publisher | University of Warwick |
| Source Sets | Ethos UK |
| Detected Language | English |
| Type | Electronic Thesis or Dissertation |
| Source | http://wrap.warwick.ac.uk/57033/ |
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