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 procurment auctions? Suppose the agency has private information about product quality, but is inclined to favour local suppliers. Decentralization saves bureaucracy and "agency costs", but leads to biased decisions. I show that the costs associated with discrimination may increase when the quality differences increase. Moreover, this effect may be dominant, implying that increased importance of local informantion may be an argument for centralization.
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|Date of creation:||2000|
|Contact details of provider:|| Postal: Department of Economics, University of Bergen Fosswinckels Gate 6. N-5007 Bergen, Norway|
Web page: http://www.uib.no/econ/
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- McAfee, R. Preston & McMillan, John, 1989. "Government procurement and international trade," Journal of International Economics, Elsevier, vol. 26(3-4), pages 291-308, May.
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- Caillaud, Bernard & Picard, Pierre & Jullien, Bruno, 1994. "National vs european industrial policies : a contract theory approach," CEPREMAP Working Papers (Couverture Orange) 9401, CEPREMAP.
- Laffont, Jean-Jacques, 1990. "Analysis of Hidden Gaming in a Three-Level Hierarchy," Journal of Law, Economics and Organization, Oxford University Press, vol. 6(2), pages 301-24, Fall.
- Greenstein, Shane, 1993. "Procedural Rules and Procurement Regulations: Complexity Creates Trade-offs," Journal of Law, Economics and Organization, Oxford University Press, vol. 9(1), pages 159-80, April.
- Laffont, Jean-Jacques & Tirole, Jean, 1991. "Auction design and favoritism," International Journal of Industrial Organization, Elsevier, vol. 9(1), pages 9-42, March.
- Vagstad, Steinar, 1995. "Promoting fair competition in public procurement," Journal of Public Economics, Elsevier, vol. 58(2), pages 283-307, October.
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