Procurement, Cost Overruns and Severance. A Study in Commitment and Renegotiation
Abstract
The first fundamental feature of R&D and risky production projects is the sequential nature of information, tasks and decisions. The second fundamental aspect is that the project usually is not carried out by the sponsor, as suggested by the word 'procurement.' This paper aims at integrating theses two aspects and literatures. It departs from the traditional principal- agent tradition in that the sequential nature of information and decision implies an exchange of information and joint-decision making at each stage of the process. It differs from the decision-theoretic models because it recognizes that asymmetric information raises the possibility of 'opportunism.' The achievements of this paper are very modest compared with its goal; accordingly this work can only be considered as a first step toward more general and more sophisticated models. The basic model (Section 2) is that of a firm engaged in an R&D process.
Document Details
- Document Type
- Technical Report
- Publication Date
- Dec 01, 1984
- Accession Number
- ADA151546
Entities
People
- Jean Tirole
Organizations
- Stanford University