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Make-or-Buy Decisions and the Manipulability of Performance Measures

Andersson, Fredrik LU (2011) In Journal of Theoretical Economics 11(1).
Abstract
The make-or-buy decision is analyzed in a simple framework combining contractual incompleteness with the existence of an imperfect but contractible performance measure. Contractual incompleteness gives rise to two regimes, identified with make and buy. The performance measure on which comprehensive contracts can be written is imperfect in the sense of being subject to manipulation. The performance incentives faced by the agent are stronger in the “buy” regime. A positive (negative) impact – or ”externality” – of manipulation on true performance favors make (buy).
Please use this url to cite or link to this publication:
author
organization
publishing date
type
Contribution to journal
publication status
published
subject
keywords
make-or-buy decision, manipulation, outsourcing
in
Journal of Theoretical Economics
volume
11
issue
1
publisher
Berkeley Electronic Press
external identifiers
  • wos:000297592200002
  • scopus:82955177061
ISSN
1935-1704
DOI
10.2202/1935-1704.1790
language
English
LU publication?
yes
id
74ad6763-9eb0-464c-98a8-827cde17b4af (old id 2205520)
alternative location
http://www.bepress.com/bejte
date added to LUP
2011-11-21 11:48:43
date last changed
2017-01-01 05:39:54
@article{74ad6763-9eb0-464c-98a8-827cde17b4af,
  abstract     = {The make-or-buy decision is analyzed in a simple framework combining contractual incompleteness with the existence of an imperfect but contractible performance measure. Contractual incompleteness gives rise to two regimes, identified with make and buy. The performance measure on which comprehensive contracts can be written is imperfect in the sense of being subject to manipulation. The performance incentives faced by the agent are stronger in the “buy” regime. A positive (negative) impact – or ”externality” – of manipulation on true performance favors make (buy).},
  author       = {Andersson, Fredrik},
  issn         = {1935-1704},
  keyword      = {make-or-buy decision,manipulation,outsourcing},
  language     = {eng},
  number       = {1},
  publisher    = {Berkeley Electronic Press},
  series       = {Journal of Theoretical Economics},
  title        = {Make-or-Buy Decisions and the Manipulability of Performance Measures},
  url          = {http://dx.doi.org/10.2202/1935-1704.1790},
  volume       = {11},
  year         = {2011},
}