Preferred Suppliers in Asymmetric Auction Markets

Martin K. Perry and Roberto Burguet

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: 2015-09
New Economics Papers: this item is included in nep-com, nep-gth and nep-mic
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

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Persistent link: https://EconPapers.repec.org/RePEc:bge:wpaper:791

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