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Lanny Arvan Basanes, Carlos Federico 2015-09-25T22:47:35Z 2015-09-25T22:47:35Z 10000-01-01 1997 1997 Second, we analyze a procurement model where a procurer obtains an indivisible service from a contractor. The quality of this service is variable. Quality is determined by effort, investment and the realization of a random variable. Neither quality nor investment is verifiable. This means the compensation the procurer pays the contractor cannot vary with quality or investment (no piece rates). The reward for the incumbent and the probability of switching suppliers cannot be made contingent to the value of a verifiable variable. The compensation can vary over time, since the time period is verifiable. Between periods the procurer decides to retain the original contractor or to switch suppliers. Switching may be sensible because the model also entails matching, that is, the random components of quality are serially correlated. The contractor should find a new supplier when in a bad match. The observed quality is a signal of the goodness of the match. Since quality is not verifiable and the switching decision cannot be contracted upon, the contractor keeps the original supplier when quality is above a certain level and switches otherwise. We show how the equilibrium investment, effort, and quality cutoff are determined. Made available in DSpace on 2015-09-25T22:47:35Z (GMT). No. of bitstreams: 2 license.txt: 4848 bytes, checksum: 96035ab3f5e1c23cc7138a224ce498bd (MD5) 9737046.pdf: 2552936 bytes, checksum: 063babfd42f8f5918d3e31d470be6d2c (MD5) Previous issue date: 1997 Embargo set by: Seth Robbins for item 86890 Lift date: Forever Reason: Restricted to the U of I community idenfinitely during batch ingest of legacy ETDs Restricted to the U of I community idenfinitely during batch ingest of legacy ETDs U of I Only 59 p. Thesis (Ph.D.)--University of Illinois at Urbana-Champaign, 1997. http://hdl.handle.net/2142/85609 (MiAaPQ)AAI9737046 eng Economics, Theory Procurement Contracts and Second Sourcing text Dissertation Ph.D. Economics Economics University of Illinois at Urbana-Champaign