Government Contracts and the Organization of Firms



Kazmi, Hina

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Government is a market maker in which it sets own demand and prices by contracting out a wide array of its functions. Government contracts are usually long-term with various levels of asset specificity. Transaction Cost Economics treats these factors as contractual risks for opportunism, ex-post. Firms organize themselves to safeguard from such risks, but government is often exposed to them since it mostly buys goods and services instead of producing them in-house. Using government satellite programs, this research examines the market for government contracting from the context of contracts, contractors and programs. The research is organized in three papers: (1) Distribution of Risks in Government Contracts (2) Buyer-Seller Networks in the Market for Government Contracting, (3) Cost of Contracting-out Program Management. The research provides a general framework to analyze various market sectors associated with government contracting.



Transaction cost economics, Opportunism, Public programs, Asset specificity, Inter-firm networks, Contractual risks