Preferred suppliers in auction markets

Roberto Burguet, Martin K. Perry

Research output: Contribution to journalArticle

Abstract

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.

Original languageEnglish (US)
Pages (from-to)283-295
Number of pages13
JournalRAND Journal of Economics
Volume40
Issue number2
DOIs
StatePublished - 2009
Externally publishedYes

ASJC Scopus subject areas

  • Economics and Econometrics

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