Paper by Assistant Professor Wenzheng Gao Published in International Economic Review

(Correspondent: Zhao Na) Recently, the paper Uncertainty in Procurement Contracting with Time Incentives, co-authored by Dr. Gao Wenzheng, an assistant professor at Nankai Institute of Quantitative Economics, was published in the top International journal of economics, International Economic Review, March 9, 2021.

This article studies cost-plus-time (A+B) procurement contracting with time incentives in the highway construction industry. In the presence of construction uncertainty, the contractor’s actual completion time may deviate from the bid completion time, and the A+B contract design is not ex post efficient. Using data from highway procurement contracts in California, this paper shows that an ex post efficient lane rental contract would reduce the social cost by $41.39 million (43.11%) on average. Moreover, the average commuter cost would decrease by $62.06 million (78.96%), suggesting a substantial reduction in the construction externality to commuters from lane rental contracts.

International Economic Review was co-founded by the University of Pennsylvania in the United States and Osaka University in Japan in 1960. It is committed to promoting modern quantitative economics research. It is one of the most important comprehensive journals in world economics. So far, it has published micro-theories, highly cited frontier papers in many economic fields such as macroeconomics, econometrics, labor economics, industrial organization, and international trade.