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Preferred Suppliers in Auction Markets

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Author Info
Roberto Burguet ()
Martin K. Perry ()

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Abstract

In a procurement setting, this paper examines agreements between a buyer and one of the suppliers which would increase their joint surplus. The provisions of such agreements depend on the buyer's ability to design the rules of the final procurement auction. When the buyer has no such ability, their joint surplus can be increased by an agreement which grants to the preferred supplier a right-of-first-refusal on the lowest price offer from the other suppliers. When the buyer does have this ability, one agreement which maximizes their joint surplus includes a revelation game for the cost of the preferred supplier and a reserve price in the procurement auction based on that cost.

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Publisher Info
Paper provided by Unitat de Fonaments de l'Anàlisi Econòmica (UAB) and Institut d'Anàlisi Econòmica (CSIC) in its series UFAE and IAE Working Papers with number 752.08.

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Length: 22
Date of creation: 15 Jul 2008
Date of revision:
Handle: RePEc:aub:autbar:752.08

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Related research
Keywords: procurement auctions; bilateral agreements;

Other versions of this item:

Find related papers by JEL classification:
D44 - Microeconomics - - Market Structure and Pricing - - - Auctions
D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information
C79 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Other

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References listed on IDEAS
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  1. Leandro Arozamena & Federico Weinschelbaum, 2006. "A note on the suboptimality of right-of-first-refusal clauses," Economics Bulletin, Economics Bulletin, vol. 4(24), pages 1-5. [Downloadable!]
  2. Aghion, Philippe & Bolton, Patrick, 1987. "Contracts as a Barrier to Entry," American Economic Review, American Economic Association, vol. 77(3), pages 388-401, June.
  3. Burguet, Roberto & Caminal, Ramon & Matutes, Carmen, 2002. "Golden cages for showy birds: Optimal switching costs in labor contracts," European Economic Review, Elsevier, vol. 46(7), pages 1153-1185, July. [Downloadable!] (restricted)
  4. Myerson, Roger B. & Satterthwaite, Mark A., 1983. "Efficient mechanisms for bilateral trading," Journal of Economic Theory, Elsevier, vol. 29(2), pages 265-281, April. [Downloadable!] (restricted)
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  5. Federico Weinschelbaum & Leandro Arozamena, 2004. "The Effect of Corruption on Bidding Behavior in First-Price Auctions," Econometric Society 2004 Latin American Meetings 180, Econometric Society. [Downloadable!]
  6. Cramton, Peter, 1998. "Ascending auctions," European Economic Review, Elsevier, vol. 42(3-5), pages 745-756, May. [Downloadable!] (restricted)
    Other versions:
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This page was last updated on 2009-12-4.

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