Single sourcing versus multiple sourcing
AbstractWe show that in contrast to results in the extant literature, single sourcing may not be the optimal strategy of a buyer facing suppliers with strictly convex costs. As we argue, previous findings relied crucially on the joint assumption that, first, there is only a single buyer and that, second, procurement takes place in an auction organized by the buyer. Relaxing these restrictions, we obtain a richer set of results. In particular, we show that even in the original setting, where suppliers bid, committing to single sourcing is only optimal if the respective buyer controls a sufficiently large fraction of the whole procurement market. Copyright (c)2008, RAND.
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Bibliographic InfoArticle provided by RAND Corporation in its journal The RAND Journal of Economics.
Volume (Year): 39 (2008)
Issue (Month): 1 ()
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- Anton, James J. & Brusco, Sandro & Lopomo, Giuseppe, 2010.
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- Alcalde, Jose & Dahm, Matthias, 2011.
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- Gong, Jiong & Li, Jianpei & McAfee, R. Preston, 2012. "Split-award contracts with investment," Journal of Public Economics, Elsevier, vol. 96(1), pages 188-197.
- Chris Doyle & Martijn Han, 2014. "Cartelization Through Buyer Groups," Review of Industrial Organization, Springer, vol. 44(3), pages 255-275, May.
- Stenbacka, Rune & Tombak, Mihkel, 2012. "Make and buy: Balancing bargaining power," Journal of Economic Behavior & Organization, Elsevier, vol. 81(2), pages 391-402.
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