Enhancingtrustandstabilityinpurchasingconsortiafairallocationofgains.docVIP

Enhancing Trust and Stability in Purchasing Consortia: Fair Allocation of Gains Fredo Schotanus Summary Purchasing consortia are becoming more and more common practice. However, many consortia end prematurely or do not flourish. Important reasons indicated for these problems are in(directly) related to the fair allocation of gains. The purpose of this paper is to build further on solutions to allocation problems, aiming to enhance purchasing consortia trust and stability. In this paper several existing allocation concepts are described and adapted to purchasing consortia. Also, a new allocation concept is introduced and compared to existing concepts. Recommendations are given concerning which concept to use in which situation. We conclude by emphasizing the importance for purchasing consortia to choose an allocation concept. Keywords: Purchasing consortium; Gains allocation; Co-operation; Cooperative game theory Introduction Value-added pricing, lower transaction costs, reduced risks and workload, improved quality and service, better access to resources, stronger negotiation positions, lower supply risks, sharing experiences and information, and learning from others are all theoretical advantages related to groups of organisations purchasing products and / or services collectively (purchasing consortia). These advantages should outweigh related disadvantages such as set-up and maintenance costs, anti-trust (legal) and commitment issues, disclosure of sensitive information, supplier resistance, and the ‘fear of parasites’ in a large number of cases (Pye 1996; Doucette 1997; Hendrick 1997; Ireland 2002; Aylesworth 2003; Virolainen 2003). However, premature endings of existing purchasing consortia still occur regularly and other purchasing consortia do not flourish. Purchasing consortia have received relatively little attention in purchasing management research. In addition, purchasing consortia research so far has focused primarily on inductive explanations of pract