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Auctions versus negotiations : the effects of inefficient renegotiation

Title data

Herweg, Fabian ; Schmidt, Klaus M.:
Auctions versus negotiations : the effects of inefficient renegotiation.
In: The RAND Journal of Economics. Vol. 48 (15 August 2017) Issue 3 . - pp. 647-672.
ISSN 1756-2171
DOI: https://doi.org/10.1111/1756-2171.12189

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Abstract in another language

For the procurement of complex goods the early exchange of information is important to avoid costly renegotiation. If the buyer can specify the main characteristics of possible design improvements in a complete contingent contract, scoring auctions implement the effcient allocation. If this is not feasible, the buyer must choose between a price-only auction (discouraging early information exchange) and bilateral negotiations with a preselected seller (reducing
competition). Bilateral negotiations are superior if potential design improvements are important, if renegotiation is very costly, and if the buyer's bargaining position is strong. Moreover, negotiations provide stronger incentives for sellers to investigate design improvements.

Further data

Item Type: Article in a journal
Refereed: Yes
Keywords: Adaptation Costs; Auctions; Behavioral Contract Theory; Loss
Aversion; Negotiations; Procurement; Renegotiation
Subject classification: JEL classification: D03; D82; D83; H57
Institutions of the University: Faculties > Faculty of Law, Business and Economics > Department of Economics > Chair Economics VIII: International Competition Economics > Chair Economics VIII: International Competition Economics - Univ.-Prof. Dr. Fabian Herweg
Faculties
Faculties > Faculty of Law, Business and Economics
Faculties > Faculty of Law, Business and Economics > Department of Economics
Faculties > Faculty of Law, Business and Economics > Department of Economics > Chair Economics VIII: International Competition Economics
Result of work at the UBT: Yes
DDC Subjects: 300 Social sciences
300 Social sciences > 330 Economics
Date Deposited: 12 Dec 2017 07:42
Last Modified: 12 Dec 2017 07:42
URI: https://eref.uni-bayreuth.de/id/eprint/40780