The Value of a Right of First Refusal Clause in a Procurement First-Price Auction
In a procurement first-price sealed-bid auction with risk-averse suppliers, we determine the conditions under which the buyer has an incentive to grant a supplier a right of first refusal. We show that this clause can lower the buyer’s expected cost when suppliers (the incumbent and new suppliers) are risk-neutral or slightly risk-averse. We also show that the incumbent’s expected utility is higher when he is granted a right of first refusal than when he competes under a first-price auction. So, this clause may benefit both the buyer and the favored supplier.
|Date of creation:||Nov 2012|
|Date of revision:|
|Contact details of provider:|| Postal: 45 D Avenue de l'observatoire, 25030 Besançon cedex|
Phone: 03 81 66 65 80
Fax: 03 81 66 65 76
Web page: http://crese.univ-fcomte.fr/
More information through EDIRC
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.:
- Klemperer, Paul, 1999.
"Auction Theory: a Guide to the Literature,"
CEPR Discussion Papers
2163, C.E.P.R. Discussion Papers.
- Klemperer, P., 1999. "Auction Theory: a Guide to the Literature," Economics Papers 1999-w12, Economics Group, Nuffield College, University of Oxford.
- Paul Klemperer, 1999. "Auction Theory: A Guide to the Literature," Microeconomics 9903002, EconWPA.
- Paul Klemperer, 1999. "Auction Theory: A Guide to the Literature," Economics Series Working Papers 1999-W12, University of Oxford, Department of Economics.
- 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, 2005. "The Effect of Corruption on Bidding Behavior in First-Price Auctions," Working Papers 82, Universidad de San Andres, Departamento de Economia, revised Aug 2005.
- 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.
- Shachat, Jason, 2009. "Procuring Commodities: Request for Quote or Reverse Auctions?," MPRA Paper 13418, University Library of Munich, Germany.
- 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.
- Roberto Burguet & Martin Perry, 2000. "Bribery and Favoritism by Auctioneers in Sealed Bid Auctions," Econometric Society World Congress 2000 Contributed Papers 1827, Econometric Society.
- Roberto Burguet & Martin Perry, 2002. "Bribery and Favoritism by Auctioneers in Sealed Bid Auctions," Departmental Working Papers 200205, Rutgers University, Department of Economics.
- Lee, Joon-Suk, 2008. "Favoritism in asymmetric procurement auctions," International Journal of Industrial Organization, Elsevier, vol. 26(6), pages 1407-1424, November.
- 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.
- Grosskopf, Brit & Roth, Alvin E., 2009.
"If You are Offered the Right of First Refusal, Should You Accept? An Investigation of Contract Design,"
4261988, Harvard University Department of Economics.
- Grosskopf, Brit & Roth, Alvin E., 2009. "If you are offered the Right of First Refusal, should you accept? An investigation of contract design," Games and Economic Behavior, Elsevier, vol. 65(1), pages 176-204, January.
- Brit Grosskopf & Alvin E. Roth, 2006. "If you are offered the Right of First Refusal, Should you accept? An Investigation of Contract Design," Levine's Bibliography 122247000000001017, UCLA Department of Economics.
- Hayley H. Chouinard, 2005. "Auctions with and without the Right of First Refusal and National Park Service Concession Contracts," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 87(4), pages 1083-1088.
- Bruno Biais & Peter Bossaerts, 1998. "Asset Prices and Trading Volume in a Beauty Contest," Review of Economic Studies, Oxford University Press, vol. 65(2), pages 307-340.
When requesting a correction, please mention this item's handle: RePEc:crb:wpaper:2012-03. 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: (Christian At)
If references are entirely missing, you can add them using this form.