Preferred Suppliers in Asymmetric Auction Markets
Roberto Burguet and
Martin K. Perry
No 791, Working Papers from Barcelona School of Economics
Abstract:
This paper examines preference in procurement with asymmetric suppliers. The preferred supplier has a right-of-first-refusal to obtain the contract at a price equal to the bid of a competing supplier. Despite the inefficiency created by the right-of-first-refusal, preference increases the joint surplus of the buyer and the preferred supplier. The buyer can increase his surplus by holding a pre-auction for the right-of-first-refusal. This is true even when the ex ante stronger supplier wins this pre-auction for preference.
Keywords: procurement auctions; vertical integration; bargaining solutions (search for similar items in EconPapers)
JEL-codes: C79 D44 D82 (search for similar items in EconPapers)
Date: 2014-10
New Economics Papers: this item is included in nep-com, nep-gth and nep-mic
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Citations: View citations in EconPapers (1)
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Persistent link: https://EconPapers.repec.org/RePEc:bge:wpaper:791
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