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Auctions for Split-Award Contracts

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Author Info

  • Martin K. Perry

    ()
    (Rutgers University, New Brunswick, New Jersey, USA)

  • JÛzsef S·kovics

Abstract

The buyer of a homogeneous input divides his input requirements into two contracts that are awarded to different suppliers. He uses a sequential second-price auction to award a primary and a secondary contract. With a fixed number of suppliers the buyer pays a higher expected price than with a sole-source auction. The premium paid to the winner of the secondary contract must also be paid to the winner of the primary contract as an opportunity cost. When entry is endogenous, we identify the conditions under which a secondary contract can increase the number of suppliers and lower the expected price. Copyright Blackwell Publishing Ltd. 2003.

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Bibliographic Info

Article provided by Wiley Blackwell in its journal The Journal of Industrial Economics.

Volume (Year): 51 (2003)
Issue (Month): 2 (06)
Pages: 215-242

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Handle: RePEc:bla:jindec:v:51:y:2003:i:2:p:215-242

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Web page: http://www.blackwellpublishing.com/journal.asp?ref=0022-1821

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Web: http://www.blackwellpublishing.com/subs.asp?ref=0022-1821

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Cited by:
  1. Sarah Parlane & Ying-Yi Tsai, 2013. "Optimal Contract Orders and Relationship-Specific Investments in Vertical Organizations," Working Papers 201316, School Of Economics, University College Dublin.
  2. Inderst, Roman & Shaffer, Greg, 2004. "Retail Mergers: Buyer Power and Product Variety," CEPR Discussion Papers 4236, C.E.P.R. Discussion Papers.
  3. Alcalde, José & Dahm, Matthias, 2011. "Competition for Procurement Shares," Working Papers 2072/169682, Universitat Rovira i Virgili, Department of Economics.
  4. Chrysovalantou Milliou, 2004. "Exclusive Dealing And Compatibility Of Investments," Economics Working Papers we044919, Universidad Carlos III, Departamento de Economía.
  5. Gong, Jiong & Li, Jianpei & McAfee, R. Preston, 2012. "Split-award contracts with investment," Journal of Public Economics, Elsevier, vol. 96(1), pages 188-197.
  6. Bichler, Martin & Schneider, Stefan & Guler, Kemal & Sayal, Mehmet, 2011. "Compact bidding languages and supplier selection for markets with economies of scale and scope," European Journal of Operational Research, Elsevier, vol. 214(1), pages 67-77, October.

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