Concurrent Business and Buyer–Supplier Behavior in B2B Auctions: Evidence from Truckload Transportation

Abstract

Buyers often procure distinct goods and services from the same supplier. Accordingly, business exchanged in one setting may affect exchanges between the buyer and supplier in other settings. We study how business procured via online business‐to‐business (B2B) auctions is affected by business exchanged between the buyer and supplier concurrent to the auctions (concurrent business). Using two transactional datasets, one with auctions held by a large buyer of transportation services over a 4‐year period and another with the buyer's transactions with suppliers over the same time period but governed by long‐term contracts, we analyze whether the contractual business affects decisions made in the auctions. We find that the buyer's auction–invitation decisions are affected by a supplier's auction performance and the presence and magnitude of the concurrent business relationship, showing that relationships still matter when buyers use online B2B auctions for procurement. After the concurrent relationship ends, auction invitations eventually cease; this effect, however, is moderated by the supplier's performance in the auctions. Concurrent business also affects supplier decisions in the form of reference prices. When a buyer and supplier have a preexisting price for the service up for auction, the supplier at times substitutes that for their bid price, with considerable heterogeneity explained by a supplier's business model, market conditions, and the recent usage of the contract price in the concurrent relationship. The business relationship external to a B2B auction significantly affects the decisions made within an auction through multiple mechanisms.

Unintended responses to IT‐enabled monitoring: The case of the electronic logging device mandate

“…With regard to shippers, our findings suggest that they should closely examine whether the carriers with whom they have long-term contracts have seen unsafe driving violations and crashes increase in frequency since the ELD mandate took effect, with special emphasis placed on smaller carriers. To the extent that shippers interpret such increases as a lack of sound operating routines and poor managerial control (Lehman, Cooil, & Ramanujam, 2019), they may want to reduce their tender offerings (Scott, 2019) to these carriers and not invite these carriers when they conduct their next strategic procurement auction (Caplice, 2007). Similarly, insurance companies should closely examine whether the carriers they insure have seen an increase in unsafe driving violations and crashes and adjust rates accordingly.…”

Pricing Dynamics in the Truckload Sector: The Moderating Role of the Electronic Logging Device Mandate

“…He also reports that large brokers' bids are strongly positively correlated, which suggests they have similar information about market conditions. Scott (2019) finds that carriers engaged with a shipper via contract relations will sometimes substitute the contract price for the spot price, especially when carriers face greater costs in determining spot prices.…”

“…For example, are spot prices from Los Angeles to Dallas more cointegrated with spot prices from Dallas to Los Angeles vis-àvis Chicago to Atlanta? Addressing questions of this sort would build on recent work by Scott (2018Scott ( , 2019.…”

Do voluntary environmental programs matter? Evidence from the EPA SmartWay program

“…The U.S. motor carrier industry offers a unique context to study the efficacy of a government‐sponsored environmental program because it has over 500,000 competitors, low barriers to entry, and buyers of transportation services require trucking firms to compete (often annually) in auctions for business (FMCSA, 2018). Thus, incumbent service providers are often replaced with new firms (Scott, 2019). These industry characteristics plausibly motivate trucking firms to seek out resources that can provide them with a source of competitive advantage.…”