Adaptive Contracting: The Trial-and-Error Approach to Outsourcing

Morten Bennedsen () and Christian Schultz ()
Additional contact information
Morten Bennedsen: Copenhagen Business School
Christian Schultz: University of Copenhagen

Chapter 4 in Institutions, Equilibria and Efficiency, 2006, pp 49-68 from Springer

Abstract: Summary Adaptive contracting occurs when a principal experiments with the delegation of authority through leaving contracts incomplete. We highlight two potential benefits of adaptive contracting: First, the delegation of authority can be advantageous even if the agent acts opportunistically, since expected private benefits will be shared between the parties through price negotiation. Second, the principal extracts information from experimenting with delegation of authority and we identify a positive option value embodied in the principal’s ability to extend or withdraw the delegated authority in future contracting periods.

Keywords: Incomplete contracting; Trial and error; Authority; Outsourcing; Procurement (search for similar items in EconPapers)
Date: 2006
References: Add references at CitEc
Citations:

There are no downloads for this item, see the EconPapers FAQ for hints about obtaining it.

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:spr:steccp:978-3-540-28161-0_4

Ordering information: This item can be ordered from
http://www.springer.com/9783540281610

DOI: 10.1007/3-540-28161-4_4

Access Statistics for this chapter

More chapters in Studies in Economic Theory from Springer
Bibliographic data for series maintained by Sonal Shukla () and Springer Nature Abstracting and Indexing ().