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Efficient Procurement Auctions with Increasing Returns

Author

Listed:
  • Oleg Baranov
  • Christina Aperjis
  • Lawrence M. Ausubel
  • Thayer Morrill

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.

Suggested Citation

  • Oleg Baranov & Christina Aperjis & Lawrence M. Ausubel & Thayer Morrill, 2017. "Efficient Procurement Auctions with Increasing Returns," American Economic Journal: Microeconomics, American Economic Association, vol. 9(3), pages 1-27, August.
    • Handle: RePEc:aea:aejmic:v:9:y:2017:i:3:p:1-27
    Note: DOI: 10.1257/mic.20160087
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    Citations

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    Cited by:

    1. Baranov, Oleg, 2018. "An efficient ascending auction for private valuations," Journal of Economic Theory, Elsevier, vol. 177(C), pages 495-517.
    2. Bernhard Kasberger & Alexander Teytelboym, 2022. "The Combinatorial Multi-Round Ascending Auction," Papers 2203.11783, arXiv.org, revised Feb 2024.
    3. Loertscher, Simon & Marx, Leslie M., 2023. "Asymptotically optimal prior-free asset market mechanisms," Games and Economic Behavior, Elsevier, vol. 137(C), pages 68-90.

    More about this item

    JEL classification:

    • D24 - Microeconomics - - Production and Organizations - - - Production; Cost; Capital; Capital, Total Factor, and Multifactor Productivity; Capacity
    • D44 - Microeconomics - - Market Structure, Pricing, and Design - - - Auctions
    • F53 - International Economics - - International Relations, National Security, and International Political Economy - - - International Agreements and Observance; International Organizations
    • H57 - Public Economics - - National Government Expenditures and Related Policies - - - Procurement
    • I11 - Health, Education, and Welfare - - Health - - - Analysis of Health Care Markets
    • L14 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Transactional Relationships; Contracts and Reputation
    • L65 - Industrial Organization - - Industry Studies: Manufacturing - - - Chemicals; Rubber; Drugs; Biotechnology; Plastics

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