Efficient Procurement Auctions with Increasing Returns
American Economic Journal: Microeconomics
vol. 9,
no. 3, August 2017
(pp. 1-27)
Abstract
For procuring from sellers with decreasing returns, there are known efficient dynamic auction formats. In this paper, we design an efficient dynamic procurement auction for the case where goods are homogeneous and bidders have increasing returns. Our motivating example is the procurement of vaccines, which often exhibit large fixed costs and small constant marginal costs. The auctioneer names a price and bidders report the interval of quantities that they are willing to sell at that price. The process repeats with successively lower prices, until the efficient outcome is discovered. We demonstrate an equilibrium that is efficient and generates VCG prices.Citation
Baranov, Oleg, Christina Aperjis, Lawrence M. Ausubel, and Thayer Morrill. 2017. "Efficient Procurement Auctions with Increasing Returns." American Economic Journal: Microeconomics, 9 (3): 1-27. DOI: 10.1257/mic.20160087Additional Materials
JEL Classification
- D24 Production; Cost; Capital; Capital, Total Factor, and Multifactor Productivity; Capacity
- D44 Auctions
- F53 International Agreements and Observance; International Organizations
- H57 National Government Expenditures and Related Policies: Procurement
- I11 Analysis of Health Care Markets
- L14 Transactional Relationships; Contracts and Reputation; Networks
- L65 Chemicals; Rubber; Drugs; Biotechnology; Plastics
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