A reputation based electronic government procurement model

Each year, governments spend billions in procurement. In this context, they generally select their suppliers based on the minimum price. However, other criteria than price may be considered to help governments minimize the procurement costs. This paper proposes a formal reputation model that is intended to determine the winners of a public procurement process. The proposed model combines three elements: (1) the direct reputation of the supplier, (2) the indirect reputation of the supplier, and (3) the difference in beliefs between the government and the supplier. The proposed model compares situations where reputation is integrated along price for selecting suppliers and where it is not. Results show that the proposed reputation model may lead to lower costs for governments. (C) 2016 Elsevier Inc. All rights reserved.