First-price equilibrium and revenue equivalence in a sequential procurement auction model

J.P. Reiss, J.R. Schöndube

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5 Citations (Scopus)

Abstract

We analyze first-price equilibrium bidding behavior of capacity-constrained firms in a sequence of two procurement auctions. In the model, firms with a cost advantage in completing the project auctioned off at the end of the sequence may enter the unfavored first auction hoping to lose it. Equilibrium bidding in both auctions deviates from the standard Symmetric Independent Private Value auction model due to opportunity costs of bidding created by possibly employed capacity. For this sequential auction model with non-identical objects, we show that revenue equivalence applies.

Original languageEnglish
Pages (from-to)99-141
Number of pages43
JournalEconomic Theory
Volume43
Issue number1
DOIs
Publication statusPublished - Apr 2010

Keywords

  • Sequential first-price auctions
  • Revenue equivalence
  • Endogenous outside options
  • Procurement auction
  • Capacity constraints
  • BIDDING BEHAVIOR
  • CONTRACTS
  • PRICES
  • COMPETITION

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