{"title":"Procurement with competing insiders","authors":"Matthew J. Robertson","doi":"10.1016/j.econlet.2025.112289","DOIUrl":null,"url":null,"abstract":"<div><div>The tournament auction is a novel approach to studying procurement in which a group of entrants compete for the chance to face a strong incumbent, or insider. I introduce competing insiders and risk aversion to this form of procurement auction and analyse how these factors affect optimal bidding behaviour. Increasing the number of strong insiders significantly decreases the degree of above-value bidding that is present with a single insider. In contrast, risk aversion increases above-value bidding relative to risk neutrality, but has a weaker effect than the number of insiders on bidding behaviour. Therefore, even with risk-averse bidders, bids eventually approach bidders’ values when the number of insiders grows large.</div></div>","PeriodicalId":11468,"journal":{"name":"Economics Letters","volume":"250 ","pages":"Article 112289"},"PeriodicalIF":1.8000,"publicationDate":"2025-04-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":"0","resultStr":null,"platform":"Semanticscholar","paperid":null,"PeriodicalName":"Economics Letters","FirstCategoryId":"96","ListUrlMain":"https://www.sciencedirect.com/science/article/pii/S0165176525001260","RegionNum":4,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":null,"EPubDate":"2025/3/25 0:00:00","PubModel":"Epub","JCR":"Q2","JCRName":"ECONOMICS","Score":null,"Total":0}
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Abstract
The tournament auction is a novel approach to studying procurement in which a group of entrants compete for the chance to face a strong incumbent, or insider. I introduce competing insiders and risk aversion to this form of procurement auction and analyse how these factors affect optimal bidding behaviour. Increasing the number of strong insiders significantly decreases the degree of above-value bidding that is present with a single insider. In contrast, risk aversion increases above-value bidding relative to risk neutrality, but has a weaker effect than the number of insiders on bidding behaviour. Therefore, even with risk-averse bidders, bids eventually approach bidders’ values when the number of insiders grows large.
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Many economists today are concerned by the proliferation of journals and the concomitant labyrinth of research to be conquered in order to reach the specific information they require. To combat this tendency, Economics Letters has been conceived and designed outside the realm of the traditional economics journal. As a Letters Journal, it consists of concise communications (letters) that provide a means of rapid and efficient dissemination of new results, models and methods in all fields of economic research.
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