Sequential procurement auctions and their effect on investment decisions

• Autores: Gonzalo Cisternas, Nicolás Figueroa
• Localización: The Rand Journal of Economics, ISSN-e 1756-2171, Vol. 46, Nº. 4, 2015, págs. 824-843
• Idioma: inglés
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• Resumen

  • We characterize the optimal mechanism and investment level in an environment where (i) two projects of independent costs are purchased sequentially, (ii) the buyer can commit to a two-period mechanism, and (iii) the winner of the first project can invest in a cost-reducing technology between auctions. We show that, in an attempt to induce more competition in the first period, the optimal mechanism gives an advantage to the first-period winner in the second auction. As a result of this advantage, the first-period winner invests more than the socially efficient level. Optimal advantages, therefore, create two different channels for cost minimization in buyer-supplier relationships