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Common-Value Procurement Auctions with Renegotiation

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This note contains the equilibrium bid functions for two types of common-value procurement auctions: 1) a procurement auction in which bids represent an enforceable contract; 2) a procurement auction in which, upon learning the true cost of supplying the good, the winning bidder can renegotiate the contract with the buyer, and each bidder must submit a bond with their bid, which is returned at the end of the auction unless they are the low bidder and renegotiate the contract.
Cite this paper
Baltaduonis, R. and Rentschler, L. (2014) Common-Value Procurement Auctions with Renegotiation. Theoretical Economics Letters, 4, 619-622. doi: 10.4236/tel.2014.48078.
 

[1] Milgrom, P.R. and Weber, R.J. (1982) A Theory of Auctions and Competitive Bidding. Econometrica, 50, 1089-1122. http://dx.doi.org/10.2307/1911865
[2] Guasch, J.L., Laffont, J.J. and Straub, S. (2008) Renegotiation of Concession Contracts in Latin America: Evidence from the Water and Transport Sectors. International Journal of Industrial Organization, 26, 421-442. http://dx.doi.org/10.1016/j.ijindorg.2007.05.003
[3] Wang, R. (2000) Bidding and Renegotiation in Procurement Auctions. European Economic Review, 44, 1577-1597. http://dx.doi.org/10.1016/S0014-2921(98)00082-8
[4] Roelofs, M.R. (2002) Common Value Auctions with Default: An Experimental Approach. Experimental Economics, 5, 233-252. http://dx.doi.org/10.1023/A:1020840420643
[5] Kagel, J.H. and Levin, D. (2002) Common Value Auctions and the Winner’s Curse. Princeton University Press, New Jersey.             eww141009lx
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