A BUREAUCRAT'S PROCUREMENT STRATEGY: BUDGET CONSTRAINTS AND RATIONING |
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Authors: | Signe ANTHON Peter BOGETOFT Bo Jellesmark THORSEN |
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Institution: | Faculty of Life Sciences, University of Copenhagen, Denmark |
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Abstract: | ABSTRACT ** : We investigate a bureaucratic principal responsible for the procurement of goods and services from private agents. The bureaucrat is evaluated on output and controlled by a limited budget. The agents maximize profit, have private information about variable production costs, and have positive outside options which are lost upon acceptance of a procurement contract. The setting is relevant for, e.g. governmental agencies. We show how this setup makes probabilistic rationing and overproduction for low-cost agents a useful tool for the bureaucrat. |
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