Robustness of simple menus of contracts in cost-based procurement

• 成果类型: Article
• 署名作者: Garrett, Daniel F.
• 署名单位: Universite de Toulouse; Universite Toulouse 1 Capitole; Toulouse School of Economics
• 刊物名称: GAMES AND ECONOMIC BEHAVIOR
• ISSN/ISSBN: 0899-8256
• DOI: 10.1016/j.geb.2013.06.004
• 发表日期: 2014
• 页码: 631-641
• 关键词: Cost-based procurement; simple mechanisms; Minimax

摘要

We consider a model of cost-based procurement in which the principal faces Knightian uncertainty about the agent's preferences for cost reduction. We show that a particularly simple incentive scheme a menu comprising a fixed-price contract and a cost-reimbursement contract minimizes the maximum expected payment, where this maximum is taken over the set of possible agent preferences. For some parameters of the problem, a range of alternative incentive schemes also satisfy this criterion. We show that the simple incentive scheme is not weakly dominated by any of the alternatives: there does not exist an alternative mechanism for which the expected payment is no higher for all realizations of the agent's preferences and strictly lower for some realization. (C) 2013 Elsevier Inc. All rights reserved.