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Split-award procurement auctions with uncertain scale economies: Theory and data

Publication ,  Journal Article
Anton, JJ; Brusco, S; Lopomo, G
Published in: Games and Economic Behavior
May 1, 2010

In a number of observed procurements, the buyer has employed an auction format that allows for a split-award outcome. We focus on settings where the range of uncertainty regarding scale economies is large and, depending on cost realizations, the efficient allocations include split-award outcomes as well as sole-source outcomes (one active supplier). We examine the price performance and efficiency properties of split-award auctions under asymmetric information. In equilibrium, both award outcomes can occur: the split-award outcome arises only when it minimizes total costs; sole-source outcomes, however, occur too often from an efficiency viewpoint. Equilibrium bids involve pooling at a common price for the split award, and separation for sole-source awards. We provide conditions under which the buyer and suppliers all benefit from a split-award format relative to a winner-take-all unit auction format. Model predictions are assessed with data on submitted 'step-ladder' bid prices for a U.S. defense split-award procurement. © 2009 Elsevier Inc.

Duke Scholars

Published In

Games and Economic Behavior

DOI

EISSN

1090-2473

ISSN

0899-8256

Publication Date

May 1, 2010

Volume

69

Issue

1

Start / End Page

24 / 41

Related Subject Headings

  • Economic Theory
  • 3803 Economic theory
  • 3801 Applied economics
  • 1402 Applied Economics
  • 1401 Economic Theory
 

Citation

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Anton, J. J., Brusco, S., & Lopomo, G. (2010). Split-award procurement auctions with uncertain scale economies: Theory and data. Games and Economic Behavior, 69(1), 24–41. https://doi.org/10.1016/j.geb.2009.09.001
Anton, J. J., S. Brusco, and G. Lopomo. “Split-award procurement auctions with uncertain scale economies: Theory and data.” Games and Economic Behavior 69, no. 1 (May 1, 2010): 24–41. https://doi.org/10.1016/j.geb.2009.09.001.
Anton JJ, Brusco S, Lopomo G. Split-award procurement auctions with uncertain scale economies: Theory and data. Games and Economic Behavior. 2010 May 1;69(1):24–41.
Anton, J. J., et al. “Split-award procurement auctions with uncertain scale economies: Theory and data.” Games and Economic Behavior, vol. 69, no. 1, May 2010, pp. 24–41. Scopus, doi:10.1016/j.geb.2009.09.001.
Anton JJ, Brusco S, Lopomo G. Split-award procurement auctions with uncertain scale economies: Theory and data. Games and Economic Behavior. 2010 May 1;69(1):24–41.
Journal cover image

Published In

Games and Economic Behavior

DOI

EISSN

1090-2473

ISSN

0899-8256

Publication Date

May 1, 2010

Volume

69

Issue

1

Start / End Page

24 / 41

Related Subject Headings

  • Economic Theory
  • 3803 Economic theory
  • 3801 Applied economics
  • 1402 Applied Economics
  • 1401 Economic Theory