The Rigidity of Public Contracts

Marian Moszoro (IESE Business School)
Pablo Spiller (UC Berkeley & NBER)
Sebastian Stolorz (George Mason University & World Bank)

Abstract: We applied algorithmic data reading and textual analysis to compare the complexity of public contracts in regulated industries subject to public scrutiny with relational private contracts. We show that public contracts are larger, feature more arbitration, evaluation, litigation, and termination clauses, and their renegotiation is formalized in amendments with more arbitration clauses. We sustain that the higher rigidity of public contracts is a political risk adaptation of public agents by which they lower the likelihood of success of third-party opportunistic challenges.


Download the paper