Split-award Auctions with Investment∗
نویسندگان
چکیده
This paper studies split-award procurement auctions where a buyer can either divide full production among multiple suppliers or award the entire production to a single supplier. The literature shows that single sourcing usually dominates multiple sourcing. This paper challenges the “winner-takes-all” argument. In a framework of generalized second-price auctions with pre-auction investment, we show that splitting the award improves the suppliers’ investment incentives, intensifies competition at the bidding stage, and minimizes the buyer’s procurement costs. Finally, in an N-supplier setting, using quadratic investment technology, we illustrate that it is optimal for a buyer to restrict the number of suppliers to two. JEL classifications: C72, D44, L14
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Author's Personal Copy Split-award Contracts with Investment ☆
In most cases authors are permitted to post their version of the article (e.g. in Word or Tex form) to their personal website or institutional repository. Authors requiring further information regarding Elsevier's archiving and manuscript policies are encouraged to visit: a b s t r a c t a r t i c l e i n f o JEL classifications: C72 D44 L14 Keywords: Split-award Generalized second-price auctio...
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