SECOND SOURCING AND THE EXPERIENCE CURVE: PRICE COMPETITION IN DEFENSE PROCUREMENT.

Published

Journal Article

The authors examine a dynamic model of price competition in defense procurement that incorporates the experience curve, asymmetric cost information, and the availability of a higher cost alternative system. The model acquisition as a two-stage process in which initial production is governed by a contract between the government and the developer. Competition is then introduced by an auction in which a second source bids against the developer for remaining production. They characterize the class of production contracts that are cost minimizing for the government and that induce the developer to reveal private cost information. When high costs are revealed, these contracts result in a credible cutoff of new system production in favor of the still higher cost alternative system.

Full Text

Duke Authors

Cited Authors

  • Anton, JJ; Yao, DA

Published Date

  • January 1, 1987

Published In

Volume / Issue

  • 18 / 1

Start / End Page

  • 57 - 76

International Standard Serial Number (ISSN)

  • 0741-6261

Digital Object Identifier (DOI)

  • 10.2307/2555535

Citation Source

  • Scopus