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Outsourcing Via Service Competition, Ehsan Elahi, Saif Benjaafar, Karen Donohue
Outsourcing Via Service Competition, Ehsan Elahi, Saif Benjaafar, Karen Donohue
Ehsan Elahi
We consider a single buyer who wishes to outsource a fixed demand for a manufactured good or service at a fixed price to a set of potential suppliers. We examine the value of competition as a mechanism for the buyer to elicit service quality from the suppliers. We compare two approaches the buyer could use to orchestrate this competition: (1) a Supplier-Allocation (SA) approach, which allocates a proportion of demand to each supplier with the proportion allocated to a supplier increasing in the quality of service the supplier promises to offer, and (2) a Supplier-Selection (SS) approach, which allocates all …