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A BUREAUCRAT'S PROCUREMENT STRATEGY: BUDGET CONSTRAINTS AND RATIONING
Author(s) -
ANTHON Signe,
BOGETOFT Peter,
THORSEN Bo Jellesmark
Publication year - 2007
Publication title -
annals of public and cooperative economics
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.526
H-Index - 37
eISSN - 1467-8292
pISSN - 1370-4788
DOI - 10.1111/j.1467-8292.2007.00333.x
Subject(s) - procurement , rationing , business , bureaucracy , profit (economics) , microeconomics , principal (computer security) , production (economics) , offset (computer science) , overproduction , economics , computer science , computer security , marketing , health care , programming language , politics , political science , law , economic growth , biochemistry , enzyme , chemistry
** : 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.