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Procurement with Unforeseen Contingencies

Title data

Herweg, Fabian ; Schmidt, Klaus M.:
Procurement with Unforeseen Contingencies.
In: Management Science. (20 November 2019) .
ISSN 0025-1909
DOI: https://doi.org/10.1287/mnsc.2019.3290

Official URL: Volltext

Abstract in another language

A buyer who wants to procure a complex good is often aware that there may be flaws in her initial design, but she does not know what they look like. Potential sellers who discover flaws have no incentive to reveal them early if the buyer uses a price-only auction. We derive an efficient mechanism that induces all sellers to report flaws early and that allocates the project to the seller with the lowest cost. We show that this can be implemented with a simple two-stage auction that does not require any prior knowledge of the set of possible flaws.

Further data

Item Type: Article in a journal
Refereed: Yes
Additional notes: Articles In Advance
Keywords: procurement; renegotiation; auction; design flaws; adaptation costs; behavioral contract theory
Institutions of the University: Faculties > Faculty of Law, Business and Economics > Department of Economics > Chair Economics VIII: International Competition Policy > Chair Economics VIII: International Competition Policy - Univ.-Prof. Dr. Fabian Herweg
Result of work at the UBT: Yes
DDC Subjects: 300 Social sciences
300 Social sciences > 330 Economics
Date Deposited: 03 Dec 2019 09:19
Last Modified: 03 Dec 2019 09:19
URI: https://eref.uni-bayreuth.de/id/eprint/53463