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Title: Precontractual Investment and Modes of Procurement
Author: De Chiara, Alessandro
Keywords: Inversions
Contractació externa
Contracting out
Issue Date: May-2020
Publisher: Elsevier B.V.
Abstract: Consider a repeated game in which a buyer must decide whether to procure goods whose design may prove defective through auctions or negotiations. To reduce the likelihood of failure, the buyer must motivate the potential suppliers to make a precontractual investment. Because the noisy signal of the supplier's investment is non-verifiable the buyer can induce the suppliers to invest only through relational contracts. I find that auctions may not enable the buyer to implement a surplus-increasing relational contract even when the players are very patient. Therefore, negotiations may be adopted, since they are more effective in stimulating the supplier's investment.
Note: Versió postprint del document publicat a:
It is part of: European Economic Review, 2020, vol. 124, num. 103404
Related resource:
ISSN: 0014-2921
Appears in Collections:Articles publicats en revistes (Economia)

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