This setting lets you change the way you view articles. You can choose to have articles open in a dialog window, a new tab, or directly in the same window.
Open in Dialog
Open in New Tab
Open in same window
Open in New Tab
Open in same window
American Economic Review: Vol. 97 No. 1 (March 2007)
AER Volume. 97, Issue 1 | 
Previous ArticleNext Article
Sign up for Email Alerts Follow us on Twitter
AER Forthcoming Articles
Full-text Article
Link to Appendix (243.74 KB)
Previous ArticleNext Article
Expand
Quick Tools:
Print Article Summary Email Link to this Article Export CitationSign up for Email Alerts Follow us on Twitter
Explore:
AER Forthcoming Articles
Simple Cost-Sharing Contracts
Article Citation
Chu, Leon Yang, and
David E. M. Sappington. 2007. "Simple Cost-Sharing Contracts."
American Economic Review,
97(1): 419-428.
DOI: 10.1257/aer.97.1.419
DOI: 10.1257/aer.97.1.419
Abstract
We extend William Rogerson's (2003) intriguing analysis of simple procurement contracts to settings where the supplier’s innate production cost is not necessarily distributed uniformly. Although the simple contract that Rogerson analyzes performs remarkably well when the smaller cost realizations are relatively likely, it can perform poorly when the larger cost realizations are relatively likely. We show that in all settings under consideration, a simple pair of contracts – one that involves linear cost sharing and one that involves full cost reimbursement – can always secure more than 73 percent of the gain achieved with a fully optimal contract. (JEL D86)
Article Full-Text Access
Full-text Article
Additional Materials
Link to Appendix (243.74 KB)
Authors
Chu, Leon Yang
Sappington, David E. M.
Sappington, David E. M.
