Selection bias induced cost overruns

Vítor Gaspar, António P.N. Leite

Research output: Contribution to journalArticle

3 Citations (Scopus)

Abstract

We develop a procurement model where given optimal rules regarding contractor selection, cost overruns are expected to occur. In this model, although the sponsor has access to unbiased ex ante estimates of project costs, the selection mechanism induces an ex post downward bias on project costs. We further investigate the relationship between signal's accuracy and the expected magnitude of the bias.

Original languageEnglish
Pages (from-to)175-187
Number of pages13
JournalInformation Economics And Policy
Volume4
Issue number2
DOIs
Publication statusPublished - 1 Jan 1989

Keywords

  • cost overruns
  • Selection bias

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