Dual Sourcing under Risky Public Procurement

Vanessa Valero ()
Additional contact information
Vanessa Valero: UZH - Universität Zürich [Zürich] = University of Zurich

Post-Print from HAL

Abstract: This paper examines the provision of a public service subject to a risk of disruption. To hedge against this risk, a public authority may use a dual sourcing policy. Instead of awarding the production to one supplier, it may split it between two suppliers. If the primary supplier is disrupted, the production may still be provided by the secondary supplier. However, dual sourcing increases the procurement cost, since the secondary supplier might be more expensive than the primary one. The public authority thus faces a trade-off when deciding upon its procurement policy. This trade-off is analysed under asymmetry of information on the secondary supplier's cost. We therefore determine the choice of the appropriate set of suppliers and the quantity to be produced by each selected supplier. We then extend our model by allowing the primary supplier to exert an effort to reduce its probability of disruption. Finally, our model is extended to consider the influence of lobbying on the public authority's choice of procurement policy.

Keywords: Public Procurement; Dual Sourcing; Risk of Disruption. (search for similar items in EconPapers)
Date: 2016-06-01
Note: View the original document on HAL open archive server: https://hal.science/hal-04739430v1
References: View references in EconPapers View complete reference list from CitEc
Citations:

Published in Annals of Economics and Statistics, 2016, 121/122, pp.25-44

Downloads: (external link)
https://hal.science/hal-04739430v1/document (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:hal:journl:hal-04739430

Access Statistics for this paper

More papers in Post-Print from HAL
Bibliographic data for series maintained by CCSD ().