This paper deals with the optimal procurement of a long term project whose full return is to be received upon completion. The project consists of several subprojects to be auctioned off in a sequence. In equilibrium, I find that: (1) Even though the procurer lacks long term commitment power, both the procurer and suppliers strictly prefer the project to move forward; (2) unlike the static setting, the procurer's optimal strategy depends on the number of suppliers and more importantly, it is nonmonotonic. As one more supplier participates in the procurement auction, the procurer softens competition in the initial stages by including more cost "types" while increasing competition in the mature stages; (3) this, in turn, implies that existing suppliers might favor participation of additional suppliers; (4) the procurer prefers to deal with long-sighted suppliers only if the project is sufficiently long. Otherwise, short-term projects are better matched with short-sighted suppliers.
Download Info
To download:
If you experience problems downloading a file, check if you have the
proper application to
view it first. Information about this may be contained
in the File-Format links below. In case of further problems read
the IDEAS help
page. Note that these files are not on the IDEAS
site. Please be patient as the files may be large.
Publisher Info
Paper provided by Duke University, Department of Economics in its series Working Papers with number
02-35.
Length: Date of creation: 2002 Date of revision: Handle: RePEc:duk:dukeec:02-35
Contact details of provider: Postal: Department of Economics Duke University 213 Social Sciences Building Box 90097 Durham, NC 27708-0097 Phone: (919) 660-1800 Fax: (919) 684-8974 Web page: http://www.econ.duke.edu/
For technical questions regarding this item, or to correct its listing, contact: (Department of Economics Webmaster).
Related research
Keywords:
Find related papers by JEL classification: H57 - Public Economics - - National Government Expenditures and Related Policies - - - Procurement D44 - Microeconomics - - Market Structure and Pricing - - - Auctions D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information
This paper has been announced in the following NEP Reports: