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Preferred suppliers in auction markets
Author(s) -
Burguet Roberto,
Perry Martin K.
Publication year - 2009
Publication title -
the rand journal of economics
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 3.687
H-Index - 108
eISSN - 1756-2171
pISSN - 0741-6261
DOI - 10.1111/j.1756-2171.2009.00065.x
Subject(s) - reverse auction , microeconomics , business , procurement , eauction , joint (building) , economic surplus , industrial organization , commerce , common value auction , economics , marketing , market economy , welfare , engineering , architectural engineering
This article examines agreements between a buyer and one of the suppliers which 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 does not have this 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 from the other suppliers. When the buyer has this ability, their joint surplus can be maximized by a revelation game for the cost of the preferred supplier and a reserve price based on that cost.