Selling procedures with private information and common values

Article Abstract:

The seller-offer approach which involves price posting is the most commonly employed procedure for conducting transactions in modern economies. By naming the price, sellers can wield monopoly power despite the fact that this has the risk of losing beneficial agreements and generating inefficiencies. A study is conducted to examine the performance of posted pricing for transactions with significant common-value elements. A two-sided private information model describes the completely revealing, perfect equilibrium offer strategy of the seller. It is revealed that fewer mutually beneficial agreements are attained as the level of common values rises. Therefore, the seller-offer procedure becomes more untenable as common-value elements increase.

Pricing, Selling

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Budgets as dynamic gatekeepers

Article Abstract:

A dynamic optimization model is used to investigate the incentives offered by budget systems. The model shows that budget strategies can be modified to minimize incentive and risk-sharing problems encountered in decentralized organizations. Several organizations use budgets as a primary mechanism for balancing decentralized allocation, in an approach known as decentralized gatekeeping. Unfortunately, decentralized budgets are inefficient since the rise and fall of the social value of expenditures over a fiscal year cannot be sufficiently monitored from the center. The best response to the problem is to smooth out expenditure values. This can be achieved by either lengthening the fiscal year or aggregating the budgets of different subunits.

Analysis, Budget, Budgeting, Budgets, Decentralization (Management)

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Bidding for contracts

Article Abstract:

In an investigation of contract bidding, an optimal contract model is developed to study the means by which contract principals can take advantage of bidding procedures. Linear contract bidding is examined, attention is given to the selection of the special case of optimal uniform contracts, and the superiority of signalling contracts is demonstrated. The trade-off between contract or selection, and the three contract risk-sharing objectives are analyzed. Results of this research indicate the overall advantage of the incentive contract over the fixed-price or the cost-plus contract structures, and the superiority of the signalling contract for improved selection performance.

Models, Purchasing, Letting of contracts, Competitive bidding

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