Download This PaperCapacity Choice and the Impact of Sunk Costs on Bidding Strategies in Procurement Auctions
14 Pages Posted: 25 Apr 1998 Last revised: 12 Mar 2008
Abstract
This paper analyzes the impact of capacity costs on bidding strategies of firms participating in procurement auctions. More efficient firms will invest in advance due to their high probability of winning the auction while less efficient bidders prefer to wait with their investments until the outcome of the auction is known. However, in equilibrium both types of firms include coverage for their investment costs into their bids and therefore adopt a full cost pricing policy.
JEL Classification: D44, L11, L14, M40, M46
Suggested Citation: Suggested Citation
Budde, Jörg and Goex, Robert F., Capacity Choice and the Impact of Sunk Costs on Bidding Strategies in Procurement Auctions. Available at SSRN: https://ssrn.com/abstract=79868 or http://dx.doi.org/10.2139/ssrn.79868
Do you have a job opening that you would like to promote on SSRN?
Feedback
Feedback to SSRN
If you need immediate assistance, call 877-SSRNHelp (877 777 6435) in the United States, or +1 212 448 2500 outside of the United States, 8:30AM to 6:00PM U.S. Eastern, Monday - Friday.