Single sourcing versus multiple sourcing
We 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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Volume (Year): 39 (2008)
Issue (Month): 1 ()
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