Cost‐sharing procurement contracts with embedded reciprocal behavior

Li Jiang; Jiangwei Xu

doi:10.1002/mde.3856

journal article Feb 28, 2023

Cost‐sharing procurement contracts with embedded reciprocal behavior

Li Jiang

Jiangwei Xu

Managerial and Decision Economics Vol. 44 No. 5 pp. 2948-2954 · Wiley

View at Publisher Save 10.1002/mde.3856

Abstract

AbstractThis paper develops a simple linear formulation of cost‐sharing procurement contracts into which reciprocal behavior is embedded. The comparative static analysis shows that the reciprocal behavior is negatively associated with the incentive. Both the cost uncertainty and the supplier's risk aversion have a positive influence on the reciprocal behavior and cooperation between buyers and suppliers. Compared to the second‐best solution in the existing principalagent literature under asymmetric information, this paper finds that the presented model is a Pareto improvement under modest restriction even if cost‐reducing effort is unverifiable. The reciprocal model has the properties of first‐best optimal social surplus.

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Details

Published: Feb 28, 2023
Vol/Issue: 44(5)
Pages: 2948-2954
License: View

Authors

L

Li Jiang

Business School Southwest University of Political Science and Law Chongqing China

J

Jiangwei Xu

Business School Southwest University of Political Science and Law Chongqing China

Cite This Article

Li Jiang, Jiangwei Xu (2023). Cost‐sharing procurement contracts with embedded reciprocal behavior. Managerial and Decision Economics, 44(5), 2948-2954. https://doi.org/10.1002/mde.3856

Cost‐sharing procurement contracts with embedded reciprocal behavior

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