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Procurement auctions with entry of bidders

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  • Kjerstad, Egil
  • Vagstad, Steinar

Abstract

In procurement auctions with a fixed number of bidders there is a tradeoff between cost efficiency and rent extraction. An optimal mechanism, therefore, entails distortions of effort. If potential suppliers must sink an entry investment before they can participate in the auction, then decreasing the firms' rent may imply reduced entry.

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Bibliographic Info

Article provided by Elsevier in its journal International Journal of Industrial Organization.

Volume (Year): 18 (2000)
Issue (Month): 8 (December)
Pages: 1243-1257

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Handle: RePEc:eee:indorg:v:18:y:2000:i:8:p:1243-1257

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Web page: http://www.elsevier.com/locate/inca/505551

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  1. Riordan, Michael H & Sappington, David E M, 1987. "Awarding Monopoly Franchises," American Economic Review, American Economic Association, vol. 77(3), pages 375-87, June.
  2. R. Preston McAfee & John McMillan, 1987. "Competition for Agency Contracts," RAND Journal of Economics, The RAND Corporation, vol. 18(2), pages 296-307, Summer.
  3. Samuelson, William F., 1985. "Competitive bidding with entry costs," Economics Letters, Elsevier, vol. 17(1-2), pages 53-57.
  4. McAfee, R. Preston & McMillan, John, 1987. "Auctions with entry," Economics Letters, Elsevier, vol. 23(4), pages 343-347.
  5. Baron, David P & Myerson, Roger B, 1982. "Regulating a Monopolist with Unknown Costs," Econometrica, Econometric Society, vol. 50(4), pages 911-30, July.
  6. Levin, Dan & Smith, James L, 1994. "Equilibrium in Auctions with Entry," American Economic Review, American Economic Association, vol. 84(3), pages 585-99, June.
  7. Preston McAfee, R. & McMillan, John, 1988. "Search mechanisms," Journal of Economic Theory, Elsevier, vol. 44(1), pages 99-123, February.
  8. Laffont, Jean-Jacques & Tirole, Jean, 1987. "Auctioning Incentive Contracts," Journal of Political Economy, University of Chicago Press, vol. 95(5), pages 921-37, October.
  9. William Vickrey, 1961. "Counterspeculation, Auctions, And Competitive Sealed Tenders," Journal of Finance, American Finance Association, vol. 16(1), pages 8-37, 03.
  10. Burguet, Roberto & Sakovics, Jozsef, 1996. "Reserve Prices without Commitment," Games and Economic Behavior, Elsevier, vol. 15(2), pages 149-164, August.
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Citations

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Cited by:
  1. Bulow, Jeremy I & Klemperer, Paul, 2007. "When are Auctions Best?," CEPR Discussion Papers 6393, C.E.P.R. Discussion Papers.
  2. Michel Mougeot & Florence Naegelen, 2011. "Franchise bidding, regulation and investment costs," Review of Economic Design, Springer, vol. 15(1), pages 37-58, March.
  3. Paul Klemperer & Jeremy Bulow, 2009. "Why Do Sellers (Usually) Prefer Auctions?," Economics Series Working Papers 2009-W05, University of Oxford, Department of Economics.
  4. Tong Li & Xiaoyong Zheng, 2006. "Entry and competition effects in first-price auctions: theory and evidence from procurement auctions," CeMMAP working papers CWP13/06, Centre for Microdata Methods and Practice, Institute for Fiscal Studies.
  5. Vagstad, Steinar, 2007. "Should auctioneers supply early information for prospective bidders?," International Journal of Industrial Organization, Elsevier, vol. 25(3), pages 597-614, June.
  6. Egil Kjerstad, 2005. "Auctions vs negotiations: a study of price differentials," Health Economics, John Wiley & Sons, Ltd., vol. 14(12), pages 1239-1251.
  7. Konrad, Kai A. & Erik Lommerud, Kjell, 2001. "Foreign direct investment, intra-firm trade and ownership structure," European Economic Review, Elsevier, vol. 45(3), pages 475-494, March.

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