Working papers, Department of Economics, WU (Wirtschaftsuniversität Wien)
Intermediary Search for Suppliers in Procurement Auctions
Abstract: In many procurement auctions, entrants determine whether
to participate in auctions accounting for their roles of intermediaries who
search for the best (or the cheapest) input suppliers. We build on a
procurement auction model with entry, combining with intermediary search
for suppliers. The novel feature is that costs of bidders are endogenously
determined by suppliers who strategically charge input prices. We show the
existence of an equilibrium with price dispersion for inputs, generating
cost heterogeneity among bidders. Interestingly, the procurement cost may
rise as the number of potential bidders increases.
Keywords: Information Frictions, Search, Procurement, Auction, Vertical Relations, Entry Deterrence, Price Dispersion; (follow links to similar papers)
JEL-Codes: D43,; D44,; D83,; L13; (follow links to similar papers)
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