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Commitment in Procurement Contracting

1988; Wiley; Volume: 90; Issue: 3 Linguagem: Inglês

10.2307/3440313

1467-9442

Michael Riordan, David E. M. Sappington,

Supply Chain and Inventory Management

Limited commitment causes inefficient production and source selecti on in a multistage procurement process wherein the contractor has privat e information about uncertain costs. A contractor's limited liability l eads a monopsonist to rely more on quantity distortions to extract rents. Moreover, sequential contracting makes it difficult for the buyer to identify the most efficient supplier. Copyright 1988 by The editors of the Scandinavian Journal of Economics.