Sequential Procurement with Subcontracting

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Sequential Procurement with Subcontracting

Author Info

Gale, Ian L
Hausch, Donald B
Stegeman, Mark

Abstract

Two symmetric sellers are approached sequentially by fragmented buyers. Each buyer conducts a second-price auction and purchases from the seller who offers the lower price. Winning an auction affects bidding for future contracts because the sellers have nonconstant marginal costs. We assume that the sellers are completely informed, and we study the unique equilibrium that survives iterated elimination of weakly dominated strategies. If subcontracting between the sellers is impossible, the final allocation of contracts is generally inefficient. If postauction subcontracting is possible, the sellers can be worse off, ex ante, than when subcontracting is impossible. Copyright 2000 by Economics Department of the University of Pennsylvania and the Osaka University Institute of Social and Economic Research Association.

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Publisher Info
Article provided by Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association in its journal International Economic Review.

Volume (Year): 41 (2000)
Issue (Month): 4 (November)
Pages: 989-1020
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Handle: RePEc:ier:iecrev:v:41:y:2000:i:4:p:989-1020

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Reiss, J. Philipp & Schöndube Jens Robert, 2007. "First-Price Equilibrium and Revenue Equivalence in a Sequential Procurement Auction Model," Research Memoranda 003, Maastricht : METEOR, Maastricht Research School of Economics of Technology and Organization. [Downloadable!]
Sui, Yong, 2006. "All-pay auctions with resale," MPRA Paper 11463, University Library of Munich, Germany, revised Oct 2007. [Downloadable!]
Frode Meland & Odd Straume, 2007. "Outsourcing in contests," Public Choice, Springer, vol. 131(3), pages 315-331, June. [Downloadable!] (restricted)
Other versions:
- Frode Meland & Odd Rune Straume, 2006. "Outsourcing in Contests," CESifo Working Paper Series CESifo Working Paper No. , CESifo Group Munich. [Downloadable!]
Bernard Lebrun, 2008. "First-Price, Second-Price, and English Auctions with Resale," Working Papers 2008_06, York University, Department of Economics. [Downloadable!]
Garratt, Rod & Troger, Thomas & Zheng, Charles Zhoucheng, 2007. "Collusion via Resale," Staff General Research Papers 12829, Iowa State University, Department of Economics. [Downloadable!]
Other versions:
- Thomas Tröger & Rodney Garratt & Charles Zheng, 2008. "Collusion via Resale," Bonn Econ Discussion Papers bgse20_2008, University of Bonn, Germany. [Downloadable!]
- Rodney J. Garratt & Thomas Tröger & Charles Z. Zheng, 2009. "Collusion via Resale," Econometrica, Econometric Society, vol. 77(4), pages 1095-1136, 07. [Downloadable!] (restricted)

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