Auctions vs. Negotiations

Herweg, Fabian und Schmidt, Klaus M. (2017): Auctions vs. Negotiations. The Role of Inefficient Renegotiation. In: RAND Journal of Economics, Bd. 48, Nr. 3: S. 647-672

Abstract

For the procurement of complex goods, the early exchange of information is important to avoid costly renegotiation. If the buyer can specify the main characteristics of possible design improvements in a complete contingent contract, scoring auctions implement the efficient allocation. If this is not feasible, the buyer must choose between a price‐only auction (discouraging early information exchange) and bilateral negotiations with a preselected seller (reducing competition). Bilateral negotiations are superior if potential design improvements are important, if renegotiation is very costly, and if the buyer's bargaining position is strong. Moreover, negotiations provide stronger incentives for sellers to investigate design improvements.

• Dokumententyp: Zeitschriftenartikel
• Fakultät: Volkswirtschaft > Lehrstühle
• Themengebiete: 300 Sozialwissenschaften > 330 Wirtschaft
• ISSN: 1756-2171; 0741-6261
• Sprache: Englisch