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Procurement with a strong insider

Author

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  • Anderlini, Luca
  • Kim, GaOn

Abstract

We consider a procurement auction with a “strong” insider and N outside bidders. Within the confines of uniformly distributed independent private values, we compare a standard second price auction with a “tournament” in which the outsiders bid first to win the right to compete with the insider. The bids of the outsiders are binding and the highest bidder proceeds to a second-price competition with the insider. We take the insider to be “sufficiently strong” relative to the insiders.

Suggested Citation

  • Anderlini, Luca & Kim, GaOn, 2024. "Procurement with a strong insider," Economics Letters, Elsevier, vol. 241(C).
    • Handle: RePEc:eee:ecolet:v:241:y:2024:i:c:s0165176524002696
    DOI: 10.1016/j.econlet.2024.111785
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    References listed on IDEAS

    as
    1. Luca Anderlini & Gaon Kim, 2024. "Tournament Auctions," CSEF Working Papers 712, Centre for Studies in Economics and Finance (CSEF), University of Naples, Italy.
    2. Eric Maskin & John Riley, 2000. "Asymmetric Auctions," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 67(3), pages 413-438.
    3. Bulow, Jeremy & Roberts, John, 1989. "The Simple Economics of Optimal Auctions," Journal of Political Economy, University of Chicago Press, vol. 97(5), pages 1060-1090, October.
    4. Hendricks, Kenneth & Porter, Robert H, 1988. "An Empirical Study of an Auction with Asymmetric Information," American Economic Review, American Economic Association, vol. 78(5), pages 865-883, December.
    5. William Vickrey, 1961. "Counterspeculation, Auctions, And Competitive Sealed Tenders," Journal of Finance, American Finance Association, vol. 16(1), pages 8-37, March.
    6. Roger B. Myerson, 1981. "Optimal Auction Design," Mathematics of Operations Research, INFORMS, vol. 6(1), pages 58-73, February.
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    More about this item

    Keywords

    Strong insider; Tournament auction; Overbidding; Increased revenue;
    All these keywords.

    JEL classification:

    • C70 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - General
    • C72 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Noncooperative Games
    • C79 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Other

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