Manipulation and auditing of public sector contracts. Kuhn, M. & Siciliani, L. European Journal of Political Economy.
Manipulation and auditing of public sector contracts [link]Paper  doi  abstract   bibtex   
Abstract We model purchaser-provider contracts when providers can inflate reimbursable activity through manipulation. Providers are audited and fined upon detected fraud. We characterise the optimal price and audit policy both in the presence and absence of commitment to an audit intensity. Under ’non-commitment’ the audit intensity increases in reported activity, allowing the provider to soften it by reducing activity together with the underlying service quality and manipulation. The purchaser then faces a trade-off between offsetting this tendency by raising price and committing to a low audit intensity by reducing price. We identify circumstances under which the two forces balance out.
@article{kuhn_manipulation_????,
	title = {Manipulation and auditing of public sector contracts},
	issn = {0176-2680},
	url = {http://www.sciencedirect.com/science/article/pii/S0176268013000645},
	doi = {10.1016/j.ejpoleco.2013.08.002},
	abstract = {Abstract
We model purchaser-provider contracts when providers can inflate reimbursable activity through manipulation. Providers are audited and fined upon detected fraud. We characterise the optimal price and audit policy both in the presence and absence of commitment to an audit intensity. Under ’non-commitment’ the audit intensity increases in reported activity, allowing the provider to soften it by reducing activity together with the underlying service quality and manipulation. The purchaser then faces a trade-off between offsetting this tendency by raising price and committing to a low audit intensity by reducing price. We identify circumstances under which the two forces balance out.},
	urldate = {2013-09-09},
	journal = {European Journal of Political Economy},
	author = {Kuhn, Michael and Siciliani, Luigi},
	keywords = {Auditing, Commitment, Fraud, Moral hazard, Public-sector contracting},
	file = {ScienceDirect Full Text PDF:files/47349/Kuhn and Siciliani - Manipulation and auditing of public sector contrac.pdf:application/pdf}
}
Downloads: 0