Auctions for Split-Award Contracts

28 Pages Posted: 24 Sep 2003

See all articles by Martin K. Perry

Martin K. Perry

Rutgers, The State University of New Jersey - Department of Economics

Jozsef Sakovics

The University of Edinburgh

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.

Suggested Citation

Perry, Martin K. and Sakovics, Jozsef, Auctions for Split-Award Contracts. Journal of Industrial Economics, Vol. 51, pp. 215-242, June 2003, Available at SSRN: https://ssrn.com/abstract=418945

Martin K. Perry (Contact Author)

Rutgers, The State University of New Jersey - Department of Economics ( email )

75 Hamilton Street
New Brunswick, NJ 08901
United States

Jozsef Sakovics

The University of Edinburgh ( email )

30 Buccleuch Place
Edinburgh, EH8 9JT, Scotland
United Kingdom

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