Incomplete Procurement Contracting with a Risk-Averse Agent

Takeshi Nishimura

Global COE Hi-Stat Discussion Paper Series from Institute of Economic Research, Hitotsubashi University

Abstract: In a two-stage procurement model, we compare two types of fixed-price contracting schemes, bundling and unbundling. The buyer's choice of scheme involves an intertemporal tradeoff: providing incentives for cost-reducing investment and sharing production-cost risk between the risk-neutral buyer and the risk-averse supplier. The main result shows that unbundling outperforms bundling when both the supplier and the entrant in ex post competitive bidding confront an aggregate risk, and the externality of the supplier's investment on the entrant's production cost is low.

Date: 2011-01
References: View complete reference list from CitEc
Citations: View citations in EconPapers (1)

Downloads: (external link)
http://gcoe.ier.hit-u.ac.jp/research/discussion/2008/pdf/gd10-165.pdf (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:hst:ghsdps:gd10-165

Access Statistics for this paper

More papers in Global COE Hi-Stat Discussion Paper Series from Institute of Economic Research, Hitotsubashi University Contact information at EDIRC.
Bibliographic data for series maintained by Tatsuji Makino ().