I this paper, we study the performance of a sourcing mechanism gaining popularity in industrial procurement environments; a tournament. Under a tournament, a buyer initially procures her parts from two suppliers with possibly different quality levels, for T time periods, i.e., she parallel sources. During this time, the buyer is able to observe noisy signals about the suppliers’ quality. At tim...

Economists have long recognized the importance of trust, but how can trust be enhanced in a marketplace? We set up a rational expectation model that allows the marketplace to target buyer trusting (via a buyer protection program) and seller trustworthiness (via penalty on cheaters) separately. We show that these two policies have opposite effects on the equilibrium level of trust: buyer protect...

Industrial buyer-seller relationships are frequently characterized by the fact that the seller and/or the buyer have to dedicate specific up-front investments to the relationship. Marketing research analyzes these relationships on the basis of Transaction Cost Economics (TCE). TCE highlights the risk of hold-up which arises after specific investments are dedicated. However, exogenous uncertaint...

Partnerships have recently been advocated as the way to gain a 'competitive advantage' in many industries. Strategic behaviour of partners, each having his own objectives and information, is an important factor for the management in a partnership. In this paper, we discuss these elements and illustrate their importance for inventory management of spare parts. We present the case of an airline c...

Online Auction Demand Online auctions represent a sizable and growing sector of the retail economy. As a result, there has been a proliferation in auctions research in recent years. However, few empirical papers consider the role of the seller in shaping the demand for auctions, a point we seek to redress. Sellers are an important component of the auctions environment because their listing beha...

Eli M. Snir Introduction Online, industrial, procurement auctions are becoming a standard component in many companies’ purchasing toolbox. Companies seek to enjoy the benefits of the marketplace by implementing competitive bidding strategies among their supply base. Recent surveys of industry practices indicate that up to 52% use some form of online auction (Beall et al, 2003), with an average ...

Economists have long recognized the importance of trust in trade and economic development, but few empirical studies address how trust is maintained and enhanced. We set up a rational expectation model that allows the marketplace to boost trust via buyer insurance or seller penalty. The model shows that buyer insurance will reduce seller trustworthiness in equilibrium because insurance increase...

The outsourcing of Information Technology (IT) services is a practice generally regulated by contracts. Since contracts are inevitably incomplete, buyer-supplier relationships are usually managed by additional mechanisms of incentives and governance, which results in a variety of success levels. Buyer perceived volatility and ambiguity of the future relationship are argued to be keys in definin...

In a dynamic storable good market where demand changes over time, we investigate the producer’s strategic incentives to hold inventories in response to the possibility of buyer stockpiling. The literature on storable goods has demonstrated that buyer stockpiling in anticipation of higher future prices harms the producer’s profitability, particularly when the producer cannot commit to future pri...