The splitting value: analyzing the value of buying in separate lots
نویسندگان
چکیده
We consider the situation in which a buyer has the option to buy a whole project or to buy a number of separate lots from different suppliers that together constitute the project. Buying a whole project reduces the coordination and management costs. First we show that buying a whole project (the bundle) might increase the project costs. Then we investigate this possible increase in project costs by analytical means. This analysis proves the increase in costs. Finally we visualize the size of the cost increase by simulation techniques. In the simulated cases, buying in separate lots turns out to save up to 10 percent of the total purchasing price. This leads to the conclusion that there is a positive effect associated with splitting into lots, we call it the splitting value.
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