Summary
Linear risk sharing provisions between companies and supply industry are considered. The provisions are characterized by target profit, target cost, and a sharing rate. The problem to assess these parameters appropriately is dealt with in a normative model. The model is parsimoniously parameterized and allows explicit solutions with respect to all contractual parameters. The simplicity of the model makes it possible to incorporate additional aspects such as diversification, heterogeneous expectations or cost monitoring expenditure.
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Bamberg, G. (1987). Risk Sharing and Subcontracting. In: Bamberg, G., Spremann, K. (eds) Agency Theory, Information, and Incentives. Springer, Berlin, Heidelberg. https://doi.org/10.1007/978-3-642-75060-1_4
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DOI: https://doi.org/10.1007/978-3-642-75060-1_4
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