Breaking the winner's curse in outsourcing

Breaking the winner's curse in outsourcing

0.00 Avg rating0 Votes
Article ID: iaor20105923
Volume: 41
Issue: 3
Start Page Number: 573
End Page Number: 594
Publication Date: Aug 2010
Journal: Decision Sciences
Authors: , , ,
Keywords: outsourcing
Abstract:

This research utilizes real options theory to investigate how to break the winner's curse in contracting through effective contracting mechanisms. We focus on two contracting approaches: flexible price contract and gain-sharing contract. For reasons of analytical tractability, we first utilize the geometric Brownian motion as the dynamic model to obtain closed-form solutions to break the outsourcing winner's curse. Subsequently, we extend our model to the mean-reverting process and provide numerical examples to verify the validity of our closed-form results, which have not previously been presented in the outsourcing literature. Finally, we provide prescriptions for the problem of the winner's curse in outsourcing.

Reviews

Required fields are marked *. Your email address will not be published.