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Auctions vs negotiations: a study of price differentials

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  • Egil Kjerstad

    (Institute for Research in Economics, Bergen, Norway)

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    Abstract

    Recent contributions in auction and bargaining theory suggest that a procurer should place more faith in the power of competition among alternative suppliers than in his or her own negotiating skill. Based on data from 216 contracts between procurers and suppliers of medical and surgical articles, we test whether auctions and bargaining result in significantly different prices. The main results are that auctions give 'thicker' markets compared with negotiations, as expected, but that auctions do not result in significantly lower prices compared with negotiations. Copyright © 2005 John Wiley & Sons, Ltd.

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    File URL: http://hdl.handle.net/10.1002/hec.1004
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    Bibliographic Info

    Article provided by John Wiley & Sons, Ltd. in its journal Health Economics.

    Volume (Year): 14 (2005)
    Issue (Month): 12 ()
    Pages: 1239-1251

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    Handle: RePEc:wly:hlthec:v:14:y:2005:i:12:p:1239-1251

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    Web page: http://www3.interscience.wiley.com/cgi-bin/jhome/5749

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    1. Ariel Rubinstein, 2010. "Perfect Equilibrium in a Bargaining Model," Levine's Working Paper Archive 661465000000000387, David K. Levine.
    2. Jean-Jaques Laffont & Jean Tirole, 1985. "Auctioning Incentive Contracts," Working papers, Massachusetts Institute of Technology (MIT), Department of Economics 403, Massachusetts Institute of Technology (MIT), Department of Economics.
    3. Bester, Helmut, 1993. "Bargaining versus Price Competition in Markets with Quality Uncertainty," American Economic Review, American Economic Association, American Economic Association, vol. 83(1), pages 278-88, March.
    4. McAfee, R Preston & McMillan, John, 1987. "Auctions and Bidding," Journal of Economic Literature, American Economic Association, American Economic Association, vol. 25(2), pages 699-738, June.
    5. McAfee, R. Preston & McMillan, John, 1987. "Auctions with entry," Economics Letters, Elsevier, Elsevier, vol. 23(4), pages 343-347.
    6. Milgrom, Paul, 1989. "Auctions and Bidding: A Primer," Journal of Economic Perspectives, American Economic Association, American Economic Association, vol. 3(3), pages 3-22, Summer.
    7. Samuelson, William F., 1985. "Competitive bidding with entry costs," Economics Letters, Elsevier, Elsevier, vol. 17(1-2), pages 53-57.
    8. Engelbrecht-Wiggans Richard, 1993. "Optimal Auctions Revisited," Games and Economic Behavior, Elsevier, Elsevier, vol. 5(2), pages 227-239, April.
    9. Levin, Dan & Smith, James L, 1994. "Equilibrium in Auctions with Entry," American Economic Review, American Economic Association, American Economic Association, vol. 84(3), pages 585-99, June.
    10. Riordan, Michael H & Sappington, David E M, 1987. "Awarding Monopoly Franchises," American Economic Review, American Economic Association, American Economic Association, vol. 77(3), pages 375-87, June.
    11. Kjerstad, E. & Vagstad, S., 2000. "Procurement Auctions with Entry of Bidders," Norway; Department of Economics, University of Bergen, Department of Economics, University of Bergen 215, Department of Economics, University of Bergen.
    12. Arnold, Michael A & Lippman, Steven A, 1998. "Posted Prices versus Bargaining in Markets with Asymmetric Information," Economic Inquiry, Western Economic Association International, Western Economic Association International, vol. 36(3), pages 450-57, July.
    13. Kennan, J. & Wilson, R., 1991. "Bargaining with Private Information," Working Papers, University of Iowa, Department of Economics 90-01rev, University of Iowa, Department of Economics.
    14. Bulow, Jeremy & Klemperer, Paul, 1996. "Auctions versus Negotiations," American Economic Review, American Economic Association, American Economic Association, vol. 86(1), pages 180-94, March.
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    Cited by:
    1. Krisztina Antal-Pomázi, 2012. "Public Procurement as Auction. Theoretical Models and Practical Problems," Public Finance Quarterly, State Audit Office of Hungary, State Audit Office of Hungary, vol. 57(4), pages 381-393.

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