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Delegating Procurement to Experts

Author

Listed:
  • Tracy Lewis
  • Chifeng Dai

Abstract

Buyers frequently delegate purchase decisions to sellers who are better informed about supply options and the cost of service. This paper analyzes how buyers optimally contract with sellers who vary in their expertise at prescribing service. We show that the most expert suppliers offer the greatest variation in advice. Buyers benefit from dealing with experts provided they contract sequentially whereby terms are negotiated gradually as the supplier acquires information

Suggested Citation

  • Tracy Lewis & Chifeng Dai, 2004. "Delegating Procurement to Experts," Econometric Society 2004 North American Summer Meetings 247, Econometric Society.
    • Handle: RePEc:ecm:nasm04:247
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    File URL: http://repec.org/esNASM04/up.21400.1075328509.pdf
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    More about this item

    Keywords

    procurement; contract; information structures;
    All these keywords.

    JEL classification:

    • D81 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Criteria for Decision-Making under Risk and Uncertainty
    • D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design
    • L14 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Transactional Relationships; Contracts and Reputation

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