Auctions for split-award contracts

Martin K. Perry, József Sákovics

Research output: Contribution to journalReview article

Abstract

The buyer of a homogeneous input divides his input requirements into two contracts that are awarded to different suppliers. He uses a sequential second-price auction to award a primary and a secondary contract. With a fixed number of suppliers the buyer pays a higher expected price than with a sole-source auction. The premium paid to the winner of the secondary contract must also be paid to the winner of the primary contract as an opportunity cost. When entry is endogenous, we identify the conditions under which a secondary contract can increase the number of suppliers and lower the expected price.

Original languageEnglish (US)
Pages (from-to)215-242
Number of pages28
JournalJournal of Industrial Economics
Volume51
Issue number2
DOIs
StatePublished - Jun 2003
Externally publishedYes

ASJC Scopus subject areas

  • Accounting
  • Business, Management and Accounting(all)
  • Economics and Econometrics

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