Abstract

http://ssrn.com/abstract=2112385
 
 

Citations



 


 



Contracting for Collaborative Services


Guillaume Roels


University of California, Los Angeles (UCLA) - Decisions, Operations, and Technology Management (DOTM) Area

Uday S. Karmarkar


University of California, Los Angeles (UCLA) - Anderson School of Management

Scott M. Carr


LECG - Washington, DC

July 18, 2012


Abstract:     
In this paper, we analyze the contracting issues that arise in collaborative services, such as consulting, financial planning, and IT outsourcing. In particular, we investigate how the choice of contract type, among fixed-fee, time-and-materials, and performance-based contracts, is driven by the service environment characteristics. We find that fixed-fee contracts contingent on performance are preferred when the service output is more sensitive to the vendor's effort, that time-and-materials contracts are optimal when the output is more sensitive to the buyer's effort, and that performance-based contracts dominate when the output is equally sensitive to both the buyer's and the vendor's inputs. We also discuss how the performance of these contracts is affected with output uncertainty, process improvement opportunities, and the involvement of multiple buyers and vendors in the joint-production process. Our model highlights the trade-offs underlying the choice of contracts in a collaborative service environment and identifies service process design changes that improve contract efficiency.

Keywords: contract

JEL Classification: C61

working papers series





Not Available For Download

Date posted: July 18, 2012  

Suggested Citation

Roels, Guillaume and Karmarkar, Uday S. and Carr, Scott M., Contracting for Collaborative Services (July 18, 2012). Available at SSRN: http://ssrn.com/abstract=2112385

Contact Information

Guillaume Roels (Contact Author)
University of California, Los Angeles (UCLA) - Decisions, Operations, and Technology Management (DOTM) Area ( email )
110 Westwood Plaza
Los Angeles, CA 90095-1481
United States
Uday S. Karmarkar
University of California, Los Angeles (UCLA) - Anderson School of Management ( email )
110 Westwood Plaza
Los Angeles, CA 90095-1481
United States
Scott M. Carr
LECG - Washington, DC ( email )
1725 Eye Street, NW
Suite 800
Washington, DC 20006
United States
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