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| Research on the Optimal Payment Mechanism in Public Service Outsourcing based on a Two-stage Screening Model |
| Hu Lan Liu Zhengchi |
| College of Economy and Trade,Hunan University,Chang Sha 410006,China |
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Abstract This paper established a two-stage screening mechanism to reduce adverse selection in public service outsourcing by using two basic payment tools——“bidding price cap” and “payment method”.Under this mechanism,the government sets the bidding price cap on a reasonable level first,and then provides contractors with a series of contracts which differ in payment methods.To make the mechanism work,the bidding price cap must equal to the sum of the highest cost which the government can stand and the contractors reservation utility,and the contracts must have different reward coefficient and penalty coefficient.
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Received: 08 June 2012
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2013, Vol. 1 
