Favoritism in asymmetric procurement auctions
I examine the costs and benefits of granting a right of first refusal (ROFR) to one bidder in a first-price procurement auction with two bidders. This right permits the favored bidder to win a contract by matching the bid of the competing bidder and is often observed in procurement auctions. I show that the auctioneer prefers to grant the ROFR to the ex-ante weak bidder and that granting this right can increase the auctioneer's expected payoff. The results continue to hold even when the auctioneer can set an optimal reserve price. Both the reserve price and the right of first refusal serve to elicit more aggressive bids and hence, to a certain degree, are substitute tools.
If you experience problems downloading a file, check if you have the proper application to view it first. 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.
As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.
References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Cantillon, Estelle, 2008.
"The effect of bidders' asymmetries on expected revenue in auctions,"
Games and Economic Behavior,
Elsevier, vol. 62(1), pages 1-25, January.
- Estelle Cantillon, 2000. "The Effect of Bidders' Asymmetries on Expected Revenue in Auctions," Cowles Foundation Discussion Papers 1279, Cowles Foundation for Research in Economics, Yale University.
- Estelle Cantillon, 2008. "The effect of bidders' asymmetries on expected revenue in auctions," ULB Institutional Repository 2013/9001, ULB -- Universite Libre de Bruxelles.
- Bulow, Jeremy I. & Huang, Ming & Klemperer, Paul, 1996.
"Toeholds and Takeovers,"
CEPR Discussion Papers
1486, C.E.P.R. Discussion Papers.
- Jeremy Bulow & Ming Huang & Paul Klemperer, 1999. "Toeholds and Takeovers," Finance 9903005, EconWPA.
- Jeremy Bulow & Ming Huang & Paul Klemperer, 1996. "Toeholds and Takeovers," Finance 9608001, EconWPA.
- Paul Klemperer & Jeremy Bulow, 1998. "Toeholds and Takeovers," Economics Series Working Papers 1998-W04, University of Oxford, Department of Economics.
- Federico Weinschelbaum & Leandro Arozamena, 2005.
"The Effect of Corruption on Bidding Behavior in First-Price Auctions,"
82, Universidad de San Andres, Departamento de Economia, revised Aug 2005.
- 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.
- 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.
- 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.
- Roberto Burguet & Martin K. Perry, 2003. "Preferred Suppliers and Vertical Integration in Auction Market," Working Papers 74, Barcelona Graduate School of Economics.
- Philip J. Reny & Shmuel Zamir, 2002.
"On the Existence of Pure Strategy Monotone Equilibria in Asymmetric First-Price Auctions,"
Discussion Paper Series
dp292, The Federmann Center for the Study of Rationality, the Hebrew University, Jerusalem.
- Philip J. Reny & Shmuel Zamir, 2004. "On the Existence of Pure Strategy Monotone Equilibria in Asymmetric First-Price Auctions," Econometrica, Econometric Society, vol. 72(4), pages 1105-1125, 07.
- Marshall Robert C. & Meurer Michael J. & Richard Jean-Francois & Stromquist Walter, 1994. "Numerical Analysis of Asymmetric First Price Auctions," Games and Economic Behavior, Elsevier, vol. 7(2), pages 193-220, September.
- Lebrun, Bernard, 1999. "First Price Auctions in the Asymmetric N Bidder Case," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 40(1), pages 125-42, February.
- Maskin, Eric & Riley, John, 2000. "Asymmetric Auctions," Review of Economic Studies, Wiley Blackwell, vol. 67(3), pages 413-38, July.
- Compte, O. & Lambert-Mogiliansky, A. & Verdier, T., 2000.
"Corruption and Competition in Public Market Auctions,"
DELTA Working Papers
2000-01, DELTA (Ecole normale supérieure).
- Compte, Olivier & Lambert-Mogiliansky, Ariane & Verdier, Thierry, 2000. "Corruption And Competition In Public Market Auctions," CEPR Discussion Papers 2434, C.E.P.R. Discussion Papers.
- Michael H. Rothkopf & Ronald M. Harstad & Yuhong Fu, 2003. "Is Subsidizing Inefficient Bidders Actually Costly?," Management Science, INFORMS, vol. 49(1), pages 71-84, January.
When requesting a correction, please mention this item's handle: RePEc:eee:indorg:v:26:y:2008:i:6:p:1407-1424. 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: (Zhang, Lei)
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 references are entirely missing, you can add them using this form.
If the full references list an item that is present in RePEc, but the system did not link 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 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.