Trust in Procurement Interactions

Nicolas Fugger, Elena Katok () and Achim Wambach

VfS Annual Conference 2015 (Muenster): Economic Development - Theory and Policy from Verein für Socialpolitik / German Economic Association

Abstract: We investigate the claim that auctions in procurement are detrimental to the buyer- seller relationship, which is expressed by less trust by the buyer and more oppor- tunistic behavior by the supplier after the sourcing. To do so, we compare exper- imentally a standard auction and a buyer-determined auction. It turns out that buyer-determined auctions result in higher prices but enable cooperation between the buyer and the selected supplier. In the buyer-determined auction it can be optimal for the buyer to choose the larger offer. The standard auctions, on the other hand, yield lower prices but reduce cooperation to a minimum. Interest- ingly the degree of trust reflected by a larger number of trades and efficiency in case of trade are significantly higher in the buyer-determined auction. Theoretical reasoning based on other-regarding preferences helps to organize the results.

JEL-codes: D02 D03 D44 (search for similar items in EconPapers)
Date: 2015
New Economics Papers: this item is included in nep-soc
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

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Related works:
Journal Article: Trust in Procurement Interactions (2019)
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Persistent link: https://EconPapers.repec.org/RePEc:zbw:vfsc15:112907

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