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The service provider’s dilemma: Applying two behavioural economic theories to CRE purchasing
Corporate Real Estate Journal,
6
(3),
220-226
(2017)
Abstract
A better understanding of two important ideas in the discipline of behavioural economics can help corporate real estate executives improve decision making and secure better outcomes for their companies. This paper first reviews the Prisoner’s Dilemma experiment, exploring the value paradox of procurement-led buying processes. The paper then reviews the Winner’s Curse phenomenon, highlighting how such procurement-led processes can actually lead to suboptimal outcomes for purchasers. The paper closes with suggested ways to improve the purchasing process and the decision making of suppliers and purchasers.
Keywords: behavioural economics; prisoner’s dilemma; winner’s curse; procurement; corporate real estate; vendor management; service provider management; cost savings
The full article is available to subscribers to the journal.
Author's Biography
Jeff Lessard is a senior managing director in Cushman & Wakefield’s Strategic Consulting group. He specialises in the development of headquarters, location, workplace and regional master plan strategies. His responsibilities with Strategic Consulting are global in scope, and his project work has spanned multiple industries: insurance, financial services, telecommunications, media, energy and consumer goods. Jeff Lessard graduated with Honours from Colgate University, Hamilton, NY and earned an MBA from the Tuck School of Business at Dartmouth College, Hanover, NH. He is an executive fiduciary for Cushman & Wakefield’s 401(k) plan. He writes a weekly e-mail newsletter on real estate, technology, architecture, design and economics.
