Abstract
| Original language | English |
|---|---|
| Journal | Economic Theory |
| Volume | 15 |
| Issue number | 1 |
| Pages (from-to) | 35-50 |
| Number of pages | 16 |
| ISSN | 0938-2259 |
| DOIs | |
| Publication status | Published - 2005 |
Keywords
- Incomplete contracting
- Trial and error
- Authority
- Outsourcing
- Procurement
Cite this
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Adaptive Contracting : The Trial-and-error Approach to Outsourcing. / Bennedsen, Morten; Schultz, Christian.
In: Economic Theory, Vol. 15, No. 1, 2005, p. 35-50.Research output: Contribution to journal › Journal article › Research › peer-review
TY - JOUR
T1 - Adaptive Contracting
T2 - The Trial-and-error Approach to Outsourcing
AU - Bennedsen, Morten
AU - Schultz, Christian
PY - 2005
Y1 - 2005
N2 - Adaptive contracting occurs when a principal experiments with the delegation of authority through leaving contracts incomplete. We highlight two potential benefits of adaptive contracting: First, the delegation of authority can be advantageous even if the agent acts opportunistically, since expected private benefits will be shared between the parties through price negotiation. Second, the principal extracts information from experimenting with delegation of authority and we identify a positive option value embodied in the principal’s ability to extend or withdraw the delegated authority in future contracting periods.
AB - Adaptive contracting occurs when a principal experiments with the delegation of authority through leaving contracts incomplete. We highlight two potential benefits of adaptive contracting: First, the delegation of authority can be advantageous even if the agent acts opportunistically, since expected private benefits will be shared between the parties through price negotiation. Second, the principal extracts information from experimenting with delegation of authority and we identify a positive option value embodied in the principal’s ability to extend or withdraw the delegated authority in future contracting periods.
KW - Incomplete contracting
KW - Trial and error
KW - Authority
KW - Outsourcing
KW - Procurement
U2 - 10.1007/s00199-004-0475-7
DO - 10.1007/s00199-004-0475-7
M3 - Journal article
VL - 15
SP - 35
EP - 50
JO - Economic Theory
JF - Economic Theory
SN - 0938-2259
IS - 1
ER -