EconPapers    
Economics at your fingertips  
 

Ex ante and Ex post Subcontracting between Two Competing Bidders

Sijing Deng () and Jiayan Xu
Additional contact information
Sijing Deng: School of Economics and Management, South China Normal University, Guangzhou 510006, P. R. China
Jiayan Xu: Lingnan College, Sun Yat-sen University, Guangzhou 510275, P. R. China

Asia-Pacific Journal of Operational Research (APJOR), 2020, vol. 37, issue 01, 1-22

Abstract: We consider a first-price sealed-bid procurement auction between two capacity constrained bidders. Either bidder, due to the capacity constraint, is unable to fulfill the auctioned project from a buyer. We consider two formats of capacity cooperation between the two competing bidders: ex ante subcontracting and ex post subcontracting. In the former case, two bidders first bargain over the capacity cooperation contract and then compete with each other by bidding for the buyer’s project. In the latter case, two bidders first submit bids to the buyer and then bargain over the capacity cooperation contract. With ex ante or ex post subcontracting, two bidders have the so-called co-opetition relationship: they compete to win the auction but cooperate through subcontracting. We find that bidders’ subcontract timing has a fundamental impact on their competitive bidding behavior and profits. Both bidders will benefit from the ex ante subcontracting, and submit higher equilibrium bid prices, compared to the case without subcontracting. The ex post subcontracting, however, will lower the equilibrium bid price and may hurt the bidder with capacity advantage when bidders’ relative bargaining power is not consistent with the relative capacity advantage.

Keywords: Subcontracting; co-opetition; bargaining; procurement auction; capacity constraint (search for similar items in EconPapers)
Date: 2020
References: View references in EconPapers View complete reference list from CitEc
Citations: Track citations by RSS feed

Downloads: (external link)
https://www.worldscientific.com/doi/abs/10.1142/S0217595919500350
Access to full text is restricted to subscribers

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:wsi:apjorx:v:37:y:2020:i:01:n:s0217595919500350

Ordering information: This journal article can be ordered from

DOI: 10.1142/S0217595919500350

Access Statistics for this article

Asia-Pacific Journal of Operational Research (APJOR) is currently edited by Gongyun Zhao

More articles in Asia-Pacific Journal of Operational Research (APJOR) from World Scientific Publishing Co. Pte. Ltd.
Bibliographic data for series maintained by Tai Tone Lim ().

 
Page updated 2022-01-04
Handle: RePEc:wsi:apjorx:v:37:y:2020:i:01:n:s0217595919500350