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 procurment auctions? Suppose the agency has private information about product quality, but is inclined to favour local suppliers. Decentralization saves bureaucracy and "agency costs", but leads to biased decisions. I show that the costs associated with discrimination may increase when the quality differences increase. Moreover, this effect may be dominant, implying that increased importance of local informantion may be an argument for centralization.

Keywords: INCENTIVE CONTRACTS; AUCTIONS; DISCRIMINATION; PROCURMENT; QUALITY (search for similar items in EconPapers)
JEL-codes: D44 D82 L51 R38 (search for similar items in EconPapers)
Date: 2000
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Citations: View citations in EconPapers (15)

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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 (1997)
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Persistent link: https://EconPapers.repec.org/RePEc:fth:bereco:211

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