Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/162511
Authors: 
Herweg, Fabian
Schmidt, Klaus M.
Year of Publication: 
2017
Series/Report no.: 
Discussion Paper 12
Abstract: 
For the procurement of complex goods the early exchange of information is important to avoid costly renegotiation. If the buyer can specify the main characteristics of possible design improvements in a complete contingent contract, a scoring auction implements the efficient allocation. If this is not feasible, the buyer must choose between a price-only auction (discouraging early information exchange) and bilateral negotiations with a preselected seller (reducing competition). Bilateral negotiations are superior if potential design improvements are important, if renegotiation is particularly costly, and if the buyer's bargaining position is strong. Moreover, negotiations provide stronger incentives for sellers to investigate design improvements.
Subjects: 
Adaptation Costs
Auctions
Behavioral Contract Theory
Loss Aversion
Negotiations
Procurement
Renegotiation
JEL: 
D03
D82
D83
H57
Document Type: 
Working Paper

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