Discussion Paper Details

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Title: Court Efficiency and Procurement Performance

Author(s): Decio Coviello, Luigi Moretti, Giancarlo Spagnolo and Paola Valbonesi

Publication Date: August 2016

Keyword(s): Court efficiency, delay, enforcement cost, litigation, performance in contract execution, public procurement and time incentives

Programme Area(s): Industrial Organization and Public Economics

Abstract: Disputes over penalties for breaching a contract are often resolved in court. A simple model illustrates how inefficient courts can sway public buyers from enforcing a penalty for late delivery in order to avoid litigation, therefore inducing sellers to delay contract delivery. By using a large dataset on Italian public procurement, we empirically study the effects of court inefficiency on public work performance. We find that where courts are inefficient: i) public works are delivered with longer delays; ii) delays increase for more valuable contracts; iii) contracts are more often awarded to larger suppliers; and iv) a higher share of the payment is postponed after delivery. Other interpretations receive less support from the data.

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Bibliographic Reference

Coviello, D, Moretti, L, Spagnolo, G and Valbonesi, P. 2016. 'Court Efficiency and Procurement Performance'. London, Centre for Economic Policy Research.