IDEAS home Printed from https://ideas.repec.org/a/rje/randje/v22y1991iautumnp329-338.html
   My bibliography  Save this article

The Contractors' Game

Author

Listed:
  • Kevin Lang
  • Robert W. Rosenthal

Abstract

We develop a symmetric-information auction model of multiproject contracting with costly bidding and increasing marginal performance costs. When there are many potential contractors or only one job, there is a zero-expected-profit symmetric equilibrium in mixed strategies. The winning bid at this equilibrium tends to rise (perversely) with the number of contractors. When there are only two potential bidders and either two or three jobs, multiple bids of a contractor at equilibrium are negatively correlated with each other. The resulting equilibrium outcome tends to divide the market between the contractors in a manner that suggests anticompetitive behavior despite the absence of any collusion.

Suggested Citation

  • Kevin Lang & Robert W. Rosenthal, 1991. "The Contractors' Game," RAND Journal of Economics, The RAND Corporation, vol. 22(3), pages 329-338, Autumn.
    • Handle: RePEc:rje:randje:v:22:y:1991:i:autumn:p:329-338
    as

    Download full text from publisher

    File URL: http://links.jstor.org/sici?sici=0741-6261%28199123%2922%3A3%3C329%3ATCG%3E2.0.CO%3B2-T&origin=repec
    File Function: full text
    Download Restriction: Access to full text is restricted to JSTOR subscribers. See http://www.jstor.org for details.
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Randall D. Cebul & James B. Rebitzer & Lowell J. Taylor & Mark E. Votruba, 2011. "Unhealthy Insurance Markets: Search Frictions and the Cost and Quality of Health Insurance," American Economic Review, American Economic Association, vol. 101(5), pages 1842-1871, August.
    2. Krishna, Vijay & Rosenthal, Robert W., 1996. "Simultaneous Auctions with Synergies," Games and Economic Behavior, Elsevier, vol. 17(1), pages 1-31, November.
    3. Israel J. Hernández & Elena Huergo Orejas, 2004. "Entrada y Competencia en los Servicios de Telecomunicaciones," Documentos de Trabajo del ICAE 0404, Universidad Complutense de Madrid, Facultad de Ciencias Económicas y Empresariales, Instituto Complutense de Análisis Económico.
    4. Thomas, Charles J., 2018. "An alternating-offers model of multilateral negotiations," Journal of Economic Behavior & Organization, Elsevier, vol. 149(C), pages 269-293.
    5. Porter, Robert H & Zona, J Douglas, 1993. "Detection of Bid Rigging in Procurement Auctions," Journal of Political Economy, University of Chicago Press, vol. 101(3), pages 518-538, June.
    6. Maarten C.W. Janssen & Eric Rasmusen, 1998. "Bertrand Competition under Uncertainty," Tinbergen Institute Discussion Papers 98-083/1, Tinbergen Institute.
    7. Gabrielli, M. Florencia & Willington, Manuel, 2023. "Estimating damages from bidding rings in first-price auctions," Economic Modelling, Elsevier, vol. 126(C).
    8. Fan, Cuihong & Wolfstetter, Elmar, 2008. "Procurement with costly bidding, optimal shortlisting, and rebates," Economics Letters, Elsevier, vol. 98(3), pages 327-334, March.
    9. Vettas, Nikolaos & Biglaiser, Gary, 2004. "Dynamic Price Competition with Capacity Constraints and Strategic Buyers," CEPR Discussion Papers 4315, C.E.P.R. Discussion Papers.
    10. Sela, Aner & Kaplan, Todd, 2003. "Auctions with Private Entry Costs," CEPR Discussion Papers 4080, C.E.P.R. Discussion Papers.
    11. Deck, Cary A. & Thomas, Charles J., 2020. "Using experiments to compare the predictive power of models of multilateral negotiations," International Journal of Industrial Organization, Elsevier, vol. 70(C).
    12. Angeles de Frutos, Maria & Rosenthal, Robert W., 1998. "On Some Myths about Sequenced Common-Value Auctions," Games and Economic Behavior, Elsevier, vol. 23(2), pages 201-221, May.
    13. Cramton, Peter C, 1995. "Money Out of Thin Air: The Nationwide Narrowband PCS Auction," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 4(2), pages 267-343, Summer.
    14. Eren Bilen & Deniz Dizdar & Chun‐Hui Miao, 2023. "Search less for a better price," Canadian Journal of Economics/Revue canadienne d'économique, John Wiley & Sons, vol. 56(2), pages 622-646, May.
    15. Charles J. Thomas, 2010. "Information Revelation And Buyer Profits In Repeated Procurement Competition," Journal of Industrial Economics, Wiley Blackwell, vol. 58(1), pages 79-105, March.
    16. Miao, Chun-Hui, 2018. "Excessive Search," MPRA Paper 85818, University Library of Munich, Germany.
    17. Todd Kaplan & Aner Sela, 2022. "Second-Price Auctions with Private Entry Costs," Games, MDPI, vol. 13(5), pages 1-14, September.
    18. David Gaddis Ross, 2012. "On Evaluation Costs in Strategic Factor Markets: The Implications for Competition and Organizational Design," Management Science, INFORMS, vol. 58(4), pages 791-804, April.
    19. Kevin Lang & Sumon Majumdar, 2003. "The Pricing of Job Characteristics When Markets Do Not Clear: Theory and Implications," NBER Working Papers 9911, National Bureau of Economic Research, Inc.
    20. Thomas, Charles J., 2004. "The competitive effects of mergers between asymmetric firms," International Journal of Industrial Organization, Elsevier, vol. 22(5), pages 679-692, May.
    21. John McMillan, 1994. "Selling Spectrum Rights," Journal of Economic Perspectives, American Economic Association, vol. 8(3), pages 145-162, Summer.
    22. Elberfeld, Walter & Wolfstetter, Elmar, 1999. "A dynamic model of Bertrand competition with entry," International Journal of Industrial Organization, Elsevier, vol. 17(4), pages 513-525, May.
    23. Manelli, Alejandro M & Vincent, Daniel R, 1995. "Optimal Procurement Mechanisms," Econometrica, Econometric Society, vol. 63(3), pages 591-620, May.

    More about this item

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:rje:randje:v:22:y:1991:i:autumn:p:329-338. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no bibliographic references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: the person in charge (email available below). General contact details of provider: https://www.rje.org .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.