ORCID: https://orcid.org/0000-0002-5011-0828
(25. November 2014):
Auctions vs. Negotiations:The Effects of Inefficient Renegotiation.
SFB/TR 15 Discussion Paper No. 484
[PDF, 462kB]

Abstract
For the procurement of complex goods the early exchange of information is important to avoid costly renegotiation ex post. We show that this is achieved by bilateral negotiations but not by auctions. Negotiations strictly outperforms auctions if sellers are likely to have superior information about possible design improvements, if renegotiation is costly, and if the buyer's bargaining position is sufficiently strong. Moreover, we show that negotiations provide stronger incentives for sellers to investigate possible design improvements than auctions. This provides an explanation for the widespread use of negotiations as a procurement mechanism in private industry.
Item Type: | Paper |
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Keywords: | Auctions; Negotiations; Procurement; Renegotiation; Adaptation Costs; Loss Aversion; Behavioral Contract Theory. |
Faculties: | Special Research Fields > Discussion Paper Series of SFB/TR 15 Governance and the Efficiency of Economic Systems Special Research Fields > Discussion Paper Series of SFB/TR 15 Governance and the Efficiency of Economic Systems > A4 - Unvollständige Verträge, Marktinteraktion und soziale Vergleichsprozesse |
Subjects: | 300 Social sciences > 330 Economics |
JEL Classification: | D03, D82, D83, H57 |
URN: | urn:nbn:de:bvb:19-epub-22030-6 |
Language: | English |
Item ID: | 22030 |
Date Deposited: | 01. Dec 2014, 15:16 |
Last Modified: | 04. Nov 2020, 13:02 |