z-logo
Premium
On the profitability of self‐sabotage
Author(s) -
Brown David P.,
Sappington David E. M.
Publication year - 2021
Publication title -
canadian journal of economics/revue canadienne d'économique
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.773
H-Index - 69
eISSN - 1540-5982
pISSN - 0008-4085
DOI - 10.1111/caje.12499
Subject(s) - procurement , profitability index , business , limiting , profit (economics) , industrial organization , production (economics) , microeconomics , economics , marketing , finance , mechanical engineering , engineering
We demonstrate how a supplier can enhance his expected profit by intentionally increasing his expected production costs or limiting his ability to reduce these costs. Such self‐sabotage benefits the supplier when it induces a buyer to implement a more favourable procurement policy, i.e., one that motivates the supplier to deliver cost‐reducing effort systematically rather than selectively. We also demonstrate how the seemingly inefficient persistent implementation of a procurement contract that does not change as the prevailing environment changes can reduce procurement costs by deterring self‐sabotage.

This content is not available in your region!

Continue researching here.

Having issues? You can contact us here