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Multiple Source Procurement Competitions

Author

Listed:
  • Sudhindra Seshadri

    (University of Maryland)

  • Kalyan Chatterjee

    (Pennsylvania State University)

  • Gary L. Lilien

    (Pennsylvania State University)

Abstract

Relationships between buying and selling organizations in business markets are varied and complex. One important relationship is procurement, or the type of alliance that buyers form with sellers to fulfill their purchasing needs. Multiple sourcing is often proposed to prevent a variety of procurement problems. We develop a bidding model to investigate the effect of multiple sourcing on competitive behavior prior to supplier selection. The model treats the number of bidders (and the decision to bid) endogenously. This distinctive feature allows us to show that the distribution of the number of bids is not independent of the competition type. Most previous models have not considered this question at all. Although multiple sourcing does increase participation in a bidding competition, we show that it can lead to strategic pre-award price increases that can mitigate the effects of the advantages stressed by most previous analyses of post-award supplier management.

Suggested Citation

  • Sudhindra Seshadri & Kalyan Chatterjee & Gary L. Lilien, 1991. "Multiple Source Procurement Competitions," Marketing Science, INFORMS, vol. 10(3), pages 246-263.
    • Handle: RePEc:inm:ormksc:v:10:y:1991:i:3:p:246-263
    DOI: 10.1287/mksc.10.3.246
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    Citations

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    Cited by:

    1. Serel, Dogan A. & Dada, Maqbool & Moskowitz, Herbert, 2001. "Sourcing decisions with capacity reservation contracts," European Journal of Operational Research, Elsevier, vol. 131(3), pages 635-648, June.
    2. Gérard P. Cachon & Fuqiang Zhang, 2007. "Obtaining Fast Service in a Queueing System via Performance-Based Allocation of Demand," Management Science, INFORMS, vol. 53(3), pages 408-420, March.
    3. Serin, Yasemin, 2012. "A geometric representation of profits in a supply chain network," International Journal of Production Economics, Elsevier, vol. 137(1), pages 36-44.
    4. Minner, Stefan, 2003. "Multiple-supplier inventory models in supply chain management: A review," International Journal of Production Economics, Elsevier, vol. 81(1), pages 265-279, January.
    5. Sandy D. Jap & Prasad A. Naik, 2008. "BidAnalyzer: A Method for Estimation and Selection of Dynamic Bidding Models," Marketing Science, INFORMS, vol. 27(6), pages 949-960, 11-12.
    6. Hazra, Jishnu & Mahadevan, B., 2009. "A procurement model using capacity reservation," European Journal of Operational Research, Elsevier, vol. 193(1), pages 303-316, February.
    7. Svoboda, Josef & Minner, Stefan & Yao, Man, 2021. "Typology and literature review on multiple supplier inventory control models," European Journal of Operational Research, Elsevier, vol. 293(1), pages 1-23.
    8. Jason Shachat & Lijia Wei, 2012. "Procuring Commodities: First-Price Sealed-Bid or English Auctions?," Marketing Science, INFORMS, vol. 31(2), pages 317-333, March.
    9. Ghodsypour, S. H. & O'Brien, C., 1998. "A decision support system for supplier selection using an integrated analytic hierarchy process and linear programming," International Journal of Production Economics, Elsevier, vol. 56(1), pages 199-212, September.
    10. Scott Fay, 2004. "Partial-Repeat-Bidding in the Name-Your-Own-Price Channel," Marketing Science, INFORMS, vol. 23(3), pages 407-418, February.
    11. Fugger, Nicolas & Laitenberger, Ulrich, 2020. "Split-award auctions and supply disruptions," ZEW Discussion Papers 20-082, ZEW - Leibniz Centre for European Economic Research.
    12. López-Bayón, Susana & González-Díaz, Manuel, 2010. "Indefinite contract duration: Evidence from electronics subcontracting," International Review of Law and Economics, Elsevier, vol. 30(2), pages 145-159, June.
    13. Richard Engelbrecht-Wiggans & Ernan Haruvy & Elena Katok, 2007. "A Comparison of Buyer-Determined and Price-Based Multiattribute Mechanisms," Marketing Science, INFORMS, vol. 26(5), pages 629-641, 09-10.
    14. Diwakar Gupta & Mili Mehrotra, 2015. "Bundled Payments For Healthcare Services: Proposer Selection and Information Sharing," Operations Research, INFORMS, vol. 63(4), pages 772-788, August.
    15. Hazra, Jishnu & Mahadevan, B., 2006. "Impact of supply base heterogeneity in electronic markets," European Journal of Operational Research, Elsevier, vol. 174(3), pages 1580-1594, November.
    16. Lim, Wei Shi & Tan, Soo Jiuan, 2010. "Outsourcing suppliers as downstream competitors: Biting the hand that feeds," European Journal of Operational Research, Elsevier, vol. 203(2), pages 360-369, June.
    17. Wedad J. Elmaghraby, 2000. "Supply Contract Competition and Sourcing Policies," Manufacturing & Service Operations Management, INFORMS, vol. 2(4), pages 350-371, April.
    18. repec:wyi:journl:002158 is not listed on IDEAS
    19. Tunay I. Tunca & Qiong Wu, 2009. "Multiple Sourcing and Procurement Process Selection with Bidding Events," Management Science, INFORMS, vol. 55(5), pages 763-780, May.
    20. Aadhaar Chaturvedi & Damian R. Beil & Victor Martínez-de-Albéniz, 2014. "Split-Award Auctions for Supplier Retention," Management Science, INFORMS, vol. 60(7), pages 1719-1737, July.
    21. Wuyts, S.H.K., 2007. "Extra-role behavior in buyer-supply relationships," Other publications TiSEM e32bed67-a969-42ac-828f-4, Tilburg University, School of Economics and Management.
    22. Ghodsypour, S. H. & O'Brien, C., 2001. "The total cost of logistics in supplier selection, under conditions of multiple sourcing, multiple criteria and capacity constraint," International Journal of Production Economics, Elsevier, vol. 73(1), pages 15-27, August.

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