Preferred suppliers in auction markets

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.

Simultaneous vs. sequential price competition with incomplete information

“…Still, as we have shown, there is a whole class of cases where b 1 (c) < b 0 (c) for all c < c. Hence, we cannot rule out the possibility that firm 1 becomes so much more aggressive in the sequential game that firm 2 ends up being worse off. 9 Comparing expected buyer surplus and efficiency between the two games presents similar complications. Note that both equilibria lead to market inefficiency: for all cost pairs (c 1 , c 2 ), the final price is higher than min{c 1 , c 2 }.…”

“…Just as above, if b 1 (c) ≥ b 0 (c) for all c it has to be the case that, for all cost pairs, the corresponding price is higher in the sequential game. Then, expected buyer surplus is lower when competition is sequential, 9 Still, we cannot provide an example where that happens. and simultaneous competition is more efficient.…”

Corruption in public–private partnerships

“…Without this effect political longevity should result in an increase in the efficiency of public spending, as mayors acquire experience and learn over time to administer the procurement process better. These findings are compatible with the predictions of Burguet and Perry (2009) who find that time reduces the asymmetric information between mayors and bidders making corruption easier to sustain. eration into a single contract with a firm or a consortium of private firms, generally including a construction company and a facility-management company.…”

“…In these cases the desire to show that the PPP deal was "cheaper" than the PSC has led to manipulation of the underlying calculations and erroneous interpretation of the results. 8 Other anti-corruption measures can be undertaken at decision making stage. Transparency International (2006) for example also considers as important to enable the civil society to participate in the decision making process.…”

Does Multi-Attribute Bidding in Public Construction Projects Prevent Corruption while Tenderers’ Preferences are Open? A Study of China’s Practice

“…In general bidders are slightly but significantly more aggressive under the ROFR than FPA. Furthermore, newcomers will bid similarly under both procedures (ROFR and FPA), and sellers exhibit the same degree of risk-aversion (Brisset and Maréchal 2014;Burguet R., Perry,M. 2009).…”