Competition for procurement shares

We propose a new procurement procedure that allocates shares of the total amount to be procured depending on the bids of suppliers. Among the properties of the mechanism are the following: (i) Bidders have an incentive to participate in the procurement procedure, as equilibrium payoffs are strictly...

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Bibliographic Details
Published in:Games and economic behavior 2013-07, Vol.80, p.193-208
Main Authors: Alcalde, José, Dahm, Matthias
Format: Article
Language:English
Subjects:
Affirmative action
Bids
Competition
Economic theory
Equilibrium
Pay-off
Payoffs
Procurement
Procurement auction
Stocks
Studies
Suppliers
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Summary:We propose a new procurement procedure that allocates shares of the total amount to be procured depending on the bids of suppliers. Among the properties of the mechanism are the following: (i) Bidders have an incentive to participate in the procurement procedure, as equilibrium payoffs are strictly positive. (ii) The mechanism allows variations in the extent to which affirmative action objectives, like promoting local industries, are pursued. (iii) Surprisingly, even while accomplishing affirmative action goals, procurement expenditures might be lower than under a standard auction format. •A new procurement procedure is proposed.•Shares of the total amount to be procured depend on bids of suppliers.•Affirmative action (or multiple sourcing) objectives can be pursued to different degrees.•Even accomplishing affirmative action goals, procurement expenditures might be lower than under a classical auction format.
ISSN:0899-8256
1090-2473
DOI:10.1016/j.geb.2013.03.007