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2020-05

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cc-by-nc-nd (c) Elsevier B.V., 2020
Please use this identifier to cite or link to this item: https://hdl.handle.net/2445/161117

Precontractual Investment and Modes of Procurement

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https://doi.org/10.1016/j.euroecorev.2020.103404

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.

Subject

Inversions, Contractació externa, Subhastes

Subject (English)

Investments, Contracting out, Auctions

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Articles publicats en revistes (Economia)

Citation

DE CHIARA, Alessandro. Precontractual Investment and Modes of Procurement. European Economic Review. 2020. Vol. 124, num. 103404. ISSN 0014-2921. [consulted: 8 of August of 2026]. Available at: https://hdl.handle.net/2445/161117

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