Auctions vs. Negotiations: The Effects of Inefficient Renegotiation

Arbeitspapier

For the procurement of complex goods the early exchange of information is important to avoid costly renegotiation ex post. We show that this is achieved by bilateral negotiations but not by auctions. Negotiations strictly outperforms auctions if sellers are likely to have superior information about possible design improvements, if renegotiation is costly, and if the buyer's bargaining position is sufficiently strong. Moreover, we show that negotiations provide stronger incentives for sellers to investigate possible design improvements than auctions. This provides an explanation for the widespread use of negotiations as a procurement mechanism in private industry.

Angaben zum Objekt

• Sprache: Englisch

Verweise und Beziehungen

• Erschienen in: Series: CESifo Working Paper ; No. 5268

Klassifikation und Themen

• Klassifikation: Wirtschaft ; Asymmetric and Private Information; Mechanism Design ; Search; Learning; Information and Knowledge; Communication; Belief; Unawareness ; National Government Expenditures and Related Policies: Procurement
• Thema: auctions ; negotiations ; procurement ; renegotiation ; adaptation costs ; loss aversion ; behavioral contract theory

Beteiligte, Orts- und Zeitangaben

• Ereignis: Geistige Schöpfung
• (wer): Herweg, Fabian ; Schmidt, Klaus
• Ereignis: Veröffentlichung
• (wer): Center for Economic Studies and ifo Institute (CESifo)
• (wo): Munich
• (wann): 2015

Weitere Informationen

• Handle: http://hdl.handle.net/10419/108812
• Letzte Aktualisierung: 10.03.2025, 11:44 MEZ