Research output: Contribution to Journal/Magazine › Journal article › peer-review
Research output: Contribution to Journal/Magazine › Journal article › peer-review
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TY - JOUR
T1 - Competition for procurement contracts and underinvestment
AU - Dasgupta, Sudipto
PY - 1990/11
Y1 - 1990/11
N2 - A two-period model is considered in which ex ante identical firms invest inperiod one, and in period two, after they learn their costs, the lowest cost firmis chosen as the winner of the contract. It is found that even though firms areracing against one another, they end up underinvesting relative to the ex antesocially optimal levels when the buyer is unable to credibly precommit to thesecond period contract.
AB - A two-period model is considered in which ex ante identical firms invest inperiod one, and in period two, after they learn their costs, the lowest cost firmis chosen as the winner of the contract. It is found that even though firms areracing against one another, they end up underinvesting relative to the ex antesocially optimal levels when the buyer is unable to credibly precommit to thesecond period contract.
M3 - Journal article
VL - 31
SP - 841
EP - 865
JO - International Economic Review
JF - International Economic Review
SN - 0020-6598
IS - 4
ER -