Centralized vs. Decentralized Procurement: Does Dispersed Information Call for Decentralized Decision-Making
Should the government procure equipment for its agencies or let them run their own procurement auctions? Suppose the agency has private information about product quality, but is inclined to favor local suppliers. Decentralization saves bureaucracy and "agency costs" (costs tied to truthful revelation of quality information), but leads to biased decisions (a discriminatory auction). I show that the costs accociated with discrimination may increase when the quality differences increase.
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|Date of creation:||1997|
|Contact details of provider:|| Postal: Department of Economics, University of Bergen Fosswinckels Gate 6. N-5007 Bergen, Norway|
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