Preferred Suppliers in Auction Markets

Martin K. Perry and Roberto Burguet

No 355, Working Papers from Barcelona School of Economics

Abstract: In a procurement setting, this paper examines agreements between a buyer and one of the suppliers which would increase their joint surplus. The provisions of such agreements depend on the buyer's ability to design the rules of the final procurement auction. When the buyer has no such ability, their joint surplus can be increased by an agreement which grants to the preferred supplier a right-of-first-refusal on the lowest price offer from the other suppliers. When the buyer does have this ability, one agreement which maximizes their joint surplus includes a revelation game for the cost of the preferred supplier and a reserve price in the procurement auction based on that cost.

Keywords: bilateral agreements; procurement auctions (search for similar items in EconPapers)
JEL-codes: C79 D44 D82 (search for similar items in EconPapers)
Date: 2015-09
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Related works:
Journal Article: Preferred suppliers in auction markets (2009)
Working Paper: Preferred Suppliers in Auction Markets (2008)
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Persistent link: https://EconPapers.repec.org/RePEc:bge:wpaper:355

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