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Procurement Auctions with Entry of Bidders

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  • Kjerstad, E.
  • Vagstad, S.

Abstract

In procurement auctions with a fixed number of bidders there is a tradeoff between cost efficiency and rent extraction. An optimal mechanism, therefore, entails distortions of effort. If potential suppliers must sink an entry investment before they can participate in the auction, then decreasing the firms' rent may imply reduced entry.

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Bibliographic Info

Paper provided by Department of Economics, University of Bergen in its series Norway; Department of Economics, University of Bergen with number 215.

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Date of creation: 2000
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Handle: RePEc:fth:bereco:215

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Postal: Department of Economics, University of Bergen Fosswinckels Gate 6. N-5007 Bergen, Norway
Phone: (+47)55589200
Fax: (+47)55589210
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Web page: http://www.uib.no/econ/
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Keywords: AUCTIONS ; CONTRACTS ; INCENTIVES;

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References

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  1. Jean-Jaques Laffont & Jean Tirole, 1985. "Auctioning Incentive Contracts," Working papers 403, Massachusetts Institute of Technology (MIT), Department of Economics.
  2. R. Preston McAfee & John McMillan, 1987. "Competition for Agency Contracts," RAND Journal of Economics, The RAND Corporation, vol. 18(2), pages 296-307, Summer.
  3. Preston McAfee, R. & McMillan, John, 1988. "Search mechanisms," Journal of Economic Theory, Elsevier, vol. 44(1), pages 99-123, February.
  4. Samuelson, William F., 1985. "Competitive bidding with entry costs," Economics Letters, Elsevier, vol. 17(1-2), pages 53-57.
  5. David P. Baron & Roger B. Myerson, 1979. "Regulating a Monopolist with Unknown Costs," Discussion Papers 412, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
  6. McAfee, R. Preston & McMillan, John, 1987. "Auctions with entry," Economics Letters, Elsevier, vol. 23(4), pages 343-347.
  7. Burguet, Roberto & Sakovics, Jozsef, 1996. "Reserve Prices without Commitment," Games and Economic Behavior, Elsevier, vol. 15(2), pages 149-164, August.
  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. William Vickrey, 1961. "Counterspeculation, Auctions, And Competitive Sealed Tenders," Journal of Finance, American Finance Association, vol. 16(1), pages 8-37, 03.
  10. Riordan, Michael H & Sappington, David E M, 1987. "Awarding Monopoly Franchises," American Economic Review, American Economic Association, vol. 77(3), pages 375-87, June.
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Citations

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Cited by:
  1. Vagstad, S., 2001. "Should Auctioneers Supply Early Information for Prospective Bidders?," Norway; Department of Economics, University of Bergen 0701, Department of Economics, University of Bergen.
  2. Bulow, Jeremy I. & Klemperer, Paul D., 2007. "When Are Auctions Best?," Research Papers 1973, Stanford University, Graduate School of Business.
  3. Paul Klemperer & Jeremy Bulow, 2009. "Why Do Sellers (Usually) Prefer Auctions?," Economics Series Working Papers 2009-W05, University of Oxford, Department of Economics.
  4. Michel Mougeot & Florence Naegelen, 2011. "Franchise bidding, regulation and investment costs," Review of Economic Design, Springer, vol. 15(1), pages 37-58, March.
  5. Tong Li & Xiaoyong Zheng, 2006. "Entry and competition effects in first-price auctions: theory and evidence from procurement auctions," CeMMAP working papers CWP13/06, Centre for Microdata Methods and Practice, Institute for Fiscal Studies.
  6. Konrad, Kai A. & Erik Lommerud, Kjell, 2001. "Foreign direct investment, intra-firm trade and ownership structure," European Economic Review, Elsevier, vol. 45(3), pages 475-494, March.
  7. Egil Kjerstad, 2005. "Auctions vs negotiations: a study of price differentials," Health Economics, John Wiley & Sons, Ltd., vol. 14(12), pages 1239-1251.

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