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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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    References

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    1. Ariel Rubinstein, 2010. "Perfect Equilibrium in a Bargaining Model," Levine's Working Paper Archive 252, David K. Levine.
    2. Engelbrecht-Wiggans Richard, 1993. "Optimal Auctions Revisited," Games and Economic Behavior, Elsevier, vol. 5(2), pages 227-239, April.
    3. Riordan, Michael H & Sappington, David E M, 1987. "Awarding Monopoly Franchises," American Economic Review, American Economic Association, vol. 77(3), pages 375-87, June.
    4. Arnold, Michael A & Lippman, Steven A, 1998. "Posted Prices versus Bargaining in Markets with Asymmetric Information," Economic Inquiry, Western Economic Association International, vol. 36(3), pages 450-57, July.
    5. Samuelson, William F., 1985. "Competitive bidding with entry costs," Economics Letters, Elsevier, vol. 17(1-2), pages 53-57.
    6. Jean-Jaques Laffont & Jean Tirole, 1985. "Auctioning Incentive Contracts," Working papers 403, Massachusetts Institute of Technology (MIT), Department of Economics.
    7. McAfee, R Preston & McMillan, John, 1987. "Auctions and Bidding," Journal of Economic Literature, American Economic Association, vol. 25(2), pages 699-738, June.
    8. Levin, Dan & Smith, James L, 1994. "Equilibrium in Auctions with Entry," American Economic Review, American Economic Association, vol. 84(3), pages 585-99, June.
    9. Bester, Helmut, 1993. "Bargaining versus Price Competition in Markets with Quality Uncertainty," American Economic Review, American Economic Association, vol. 83(1), pages 278-88, March.
    10. Kennan, John & Wilson, Robert, 1993. "Bargaining with Private Information," Journal of Economic Literature, American Economic Association, vol. 31(1), pages 45-104, March.
    11. Milgrom, Paul, 1989. "Auctions and Bidding: A Primer," Journal of Economic Perspectives, American Economic Association, vol. 3(3), pages 3-22, Summer.
    12. Kjerstad, E. & Vagstad, S., 2000. "Procurement Auctions with Entry of Bidders," Norway; Department of Economics, University of Bergen 215, Department of Economics, University of Bergen.
    13. McAfee, R. Preston & McMillan, John, 1987. "Auctions with entry," Economics Letters, Elsevier, vol. 23(4), pages 343-347.
    14. Bulow, Jeremy & Klemperer, Paul, 1996. "Auctions versus Negotiations," American Economic Review, 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, vol. 57(4), pages 381-393.

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