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As with most commercial options, there are both benefits and costs in adopting the joint purchasing approach.
In an ideal situation, the purchasing authority co-ordinating the consortia purchase would adopt a procedure that allows the selection of a competent supplier while respecting local policies. Purchasing would also be carried out in a way that is open and competitive in order to minimize the potential for abuse.
The diseconomies of scale resulting from the use of the consortia approach may outweigh the benefits thereby derived. Three particular diseconomies immediately come to mind: Cost savings through the use of a consortium may be negated by the costs incurred in organizing the consortium. This possibility is essentially an outgrowth of the principal-agent problem, which is pervasive across all levels of collective economic activity. Where an economic actor must act through another person there is always a risk the agent will put his or her own interests ahead of the principal.
Unfortunately, this hypothesis does not explain why municipalities of roughly the same size do not participate more frequently in consortium arrangements.
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