Centralized vs. Decentralized Procurement: Does Dispersed Information Call for Decentralized Decision-Making

Steinar Vagstad

Norway; Department of Economics, University of Bergen from Department of Economics, University of Bergen

Abstract: Should the government procure equipment for its agencies or let them run their own procurement auctions? Suppose the agency has private information about product quality, but is inclined to favor local suppliers. Decentralization saves bureaucracy and "agency costs" (costs tied to truthful revelation of quality information), but leads to biased decisions (a discriminatory auction). I show that the costs accociated with discrimination may increase when the quality differences increase.

Keywords: INCENTIVES; CONTRACTS; AUCTIONS; DISCRIMINATION (search for similar items in EconPapers)
JEL-codes: D44 D82 L51 R38 (search for similar items in EconPapers)
Pages: 15 pages
Date: 1997
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Related works:
Journal Article: Centralized vs. decentralized procurement: Does dispersed information call for decentralized decision-making? (2000)
Working Paper: Centralized vs. Decentralized procurement: does Dispersed Information Call for Decentralized Decision-Making? (2000)
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Persistent link: https://EconPapers.repec.org/RePEc:fth:bereco:1497

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