Strategic <i>ex ante</i> contracts: rent extraction and opportunity costs

Hua, Xinyu

doi:10.1111/j.0741-6261.2007.00112.x

Cited by 16 publications

(16 citation statements)

References 38 publications

Supporting

Mentioning

Contrasting

Order By: Relevance

“…Hua [2004] builds on the right of first refusal's rent extraction hypothesis to show how the internal buyer and the seller can use the right of first refusal as an inducement to the seller not to set a reserve price ex post . In an independent, private value setting, the seller can maximize his profit by setting a positive reserve price when running an auction between internal and external buyers.…”

Section: Literature Reviewmentioning

confidence: 99%

A RENT EXTRACTION THEORY OF RIGHT OF FIRST REFUSAL^*

Choi

2009

The J Industrial Economics

View full text Add to dashboard Cite

When a seller encumbers a property with a right of first refusal, whenever a third party offers to purchase the property, the right-holder can acquire the property by simply matching the third party's offer. I model the right as a modified auction where the right-holder gets to observe the third party's bid before making his own. I show that, compared to the standard auctions, the right increases the joint profit of the seller and the right-holder by reducing the third party's profit. This result is independent of whether the third party is aware of the right's existence and whether the right creates a welfare loss. . 1 Walker argues that the right is being used to 'inhibit [the seller] from selling in the first place. ' Walker [1999] at 6. A similar argument is also made by the highest New York state court in LIN Broadcasting v. Metromedia Inc., 74 N.Y.2d 54, 62.

show abstract

Section: Literature Reviewmentioning

confidence: 99%

A RENT EXTRACTION THEORY OF RIGHT OF FIRST REFUSAL^*

Choi

2009

The J Industrial Economics

View full text Add to dashboard Cite

show abstract

“…The research on preferred suppliers in auctions is also related to this article, in which the buyer deals with a preferred supplier and other potential suppliers in a competitive procurement setting (e.g., Hua, ; Burguet and Perry, ). The buyer first grants the preferred supplier a strategic ex ante contract (e.g., right‐of‐first‐refusal), and then conducts an auction or negotiates with other suppliers.…”

Section: Introductionmentioning

confidence: 99%

Procurement with Reverse Auction and Flexible Noncompetitive Contracts

et al. 2016

View full text Add to dashboard Cite

This article investigates a hybrid procurement mechanism that combines a reverse auction with flexible noncompetitive contracts. A buyer adopts such mechanism to procure multiple units of a product from a group of potential suppliers. Specifically, the buyer first offers contracts to some suppliers who, if accepting the contract, do not participate in the auction while committing to selling a unit to the buyer at the price of the subsequent auction. For the suppliers rejecting the offers, they can join the subsequent auction with the other suppliers to compete on the remaining units. When the buyer offers only one flexible noncompetitive contract, we find that the selected supplier may accept the offer regardless of whether he knows his exact cost information. Meanwhile, the buyer can benefit from offering such a contract, as opposed to solely conducting a regular reverse auction or offering a noncompetitive contract that does not allow suppliers declining offers to join the subsequent auction. Moreover, we find that the suppliers' information about their own costs has a significant impact on the buyer's decision. When the buyer makes multiple offers, we analyze the resulting game behavior of the selected suppliers and demonstrate that the buyer can benefit more than just offering one such contract. Therefore, the hybrid procurement mechanism can be mutually beneficial for both the buyer and the selected suppliers.

show abstract

“…The research on preferred suppliers in auctions is also related to this article, in which the buyer deals with a preferred supplier and other potential suppliers in a competitive procurement setting (e.g., Hua, 2007;Burguet and Perry, 2009). The buyer first grants the preferred supplier a strategic ex ante contract (e.g., rightof-first-refusal), and then conducts an auction or negotiates with other suppliers.…”

Section: Introductionmentioning

confidence: 99%