IDEAS home Printed from https://ideas.repec.org/a/bla/randje/v40y2009i2p283-295.html
   My bibliography  Save this article

Preferred suppliers in auction markets

Author

Listed:
  • Roberto Burguet
  • Martin K. Perry

Abstract

This article examines agreements between a buyer and one of the suppliers which 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 does not have this 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 from the other suppliers. When the buyer has this ability, their joint surplus can be maximized by a revelation game for the cost of the preferred supplier and a reserve price based on that cost. Copyright (c) 2009, RAND.

Suggested Citation

  • Roberto Burguet & Martin K. Perry, 2009. "Preferred suppliers in auction markets," RAND Journal of Economics, RAND Corporation, vol. 40(2), pages 283-295.
  • Handle: RePEc:bla:randje:v:40:y:2009:i:2:p:283-295
    as

    Download full text from publisher

    File URL: http://www.blackwell-synergy.com/doi/abs/10.1111/j.1756-2171.2009.00065.x
    File Function: link to full text
    Download Restriction: Access to full text is restricted to subscribers.

    As the access to this document is restricted, you may want to look for a different version below or search for a different version of it.

    Other versions of this item:

    References listed on IDEAS

    as
    1. 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.
    2. Arozamena, Leandro & Weinschelbaum, Federico, 2009. "The effect of corruption on bidding behavior in first-price auctions," European Economic Review, Elsevier, vol. 53(6), pages 645-657, August.
    3. Bulow, Jeremy & Klemperer, Paul, 1996. "Auctions versus Negotiations," American Economic Review, American Economic Association, vol. 86(1), pages 180-194, March.
    4. Burguet Roberto & Perry Martin K, 2007. "Bribery and Favoritism by Auctioneers in Sealed-Bid Auctions," The B.E. Journal of Theoretical Economics, De Gruyter, vol. 7(1), pages 1-27, June.
    5. Aghion, Philippe & Bolton, Patrick, 1987. "Contracts as a Barrier to Entry," American Economic Review, American Economic Association, vol. 77(3), pages 388-401, June.
    6. Leandro Arozamena & Federico Weinschelbaum, 2006. "A note on the suboptimality of right-of-first-refusal clauses," Economics Bulletin, AccessEcon, vol. 4(24), pages 1-5.
    7. Xinyu Hua, 2007. "Strategic ex ante contracts: rent extraction and opportunity costs," RAND Journal of Economics, RAND Corporation, vol. 38(3), pages 786-803, September.
    8. Peter Cramton & John McMillan & Paul Milgrom & Bradley Miller & Bridger Mitchell & Daniel Vincent & Robert Wilson, 1998. "Simultaneous Ascending Auctions with Package Bidding," Papers of Peter Cramton 98cra2, University of Maryland, Department of Economics - Peter Cramton.
    9. Myerson, Roger B. & Satterthwaite, Mark A., 1983. "Efficient mechanisms for bilateral trading," Journal of Economic Theory, Elsevier, vol. 29(2), pages 265-281, April.
    10. Cramton, Peter, 1998. "Ascending auctions," European Economic Review, Elsevier, vol. 42(3-5), pages 745-756, May.
    11. repec:ebl:ecbull:v:4:y:2006:i:24:p:1-5 is not listed on IDEAS
    12. Roger B. Myerson, 1981. "Optimal Auction Design," Mathematics of Operations Research, INFORMS, vol. 6(1), pages 58-73, February.
    13. Bikhchandani Sushil & Lippman Steven A. & Ryan Reade, 2005. "On the Right-of-First-Refusal," The B.E. Journal of Theoretical Economics, De Gruyter, vol. 5(1), pages 1-44, April.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Thomas, Charles J., 2011. "Vertical mergers in procurement markets," International Journal of Industrial Organization, Elsevier, vol. 29(2), pages 200-209, March.
    2. Laurent Lamy & Philippe Jehiel, 2016. "On the benefits of set-asides," Post-Print hal-01688237, HAL.
    3. Колесник Г.В. & Швец Н.Н., 2015. "Структурирование Рынков - Инструмент Государственной Промышленной Политики," Журнал Экономика и математические методы (ЭММ), Центральный Экономико-Математический Институт (ЦЭМИ), vol. 51(4), pages 85-95, октябрь.
    4. Klenio Barbosa & Pierre C. Boyer, 2012. "Discrimination in Dynamic Procurement Design with Learning-by-doing," CESifo Working Paper Series 3947, CESifo Group Munich.
    5. Arozamena, Leandro & Weinschelbaum, Federico, 2011. "On favoritism in auctions with entry," Economics Letters, Elsevier, vol. 110(3), pages 265-267, March.
    6. Coviello, Decio & Gagliarducci, Stefano, 2010. "Building Political Collusion: Evidence from Procurement Auctions," IZA Discussion Papers 4939, Institute for the Study of Labor (IZA).
    7. Mass, Helene & Fugger, Nicolas & Gretschko, Vitali & Wambach, Achim, 2017. "Imitation perfection: A simple rule to prevent discrimination in procurement," ZEW Discussion Papers 17-058, ZEW - Zentrum für Europäische Wirtschaftsforschung / Center for European Economic Research.
    8. Constantino Hevia & Martin Gonzalez‐Rozada & Martin Sola & Fabio Spagnolo, 2015. "Estimating and Forecasting the Yield Curve Using A Markov Switching Dynamic Nelson and Siegel Model," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 30(6), pages 987-1009, September.
    9. Karl Hackenbrack & Mikhael Shor, 2012. "Auditor Preference," Working papers 2012-20, University of Connecticut, Department of Economics.
    10. Jehiel, Philippe & Lamy, Laurent, 2014. "On discrimination in procurement auctions," CEPR Discussion Papers 9790, C.E.P.R. Discussion Papers.
    11. Roberto Burguet & Martin K. Perry, 2014. "Preferred Suppliers in Asymmetric Auction Markets," Working Papers 791, Barcelona Graduate School of Economics.
    12. Leandro Arozamena & Nicholas Shunda & Federico Weinschelbaum, 2014. "Optimal nondiscriminatory auctions with favoritism," Economics Bulletin, AccessEcon, vol. 34(1), pages 252-262.
    13. Karine Brisset & François Cochard & François Maréchal, 2015. "Is the newcomer more aggressive when the incumbent is granted a Right-of-First-Refusal in a procurement auction? Experimental Evidence," Theory and Decision, Springer, vol. 78(4), pages 639-665, April.
    14. Daniel Z. Li & Minbo Xu, 2017. "Equilibrium Competition, Social Welfare and Corruption in Procurement Auctions," Working Papers 2017_04, Durham University Business School.
    15. Huang, He & Li, Zhipeng, 2015. "Procurement auctions with ex-ante endogenous bribery," Economic Modelling, Elsevier, vol. 47(C), pages 111-117.

    More about this item

    JEL classification:

    • D44 - Microeconomics - - Market Structure, Pricing, and Design - - - Auctions
    • D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design
    • C79 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Other

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:bla:randje:v:40:y:2009:i:2:p:283-295. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Wiley-Blackwell Digital Licensing) or (Christopher F. Baum). General contact details of provider: http://edirc.repec.org/data/randdus.html .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.