Auctioning Off Budgets in Procurement

Title data

Rottner, Claudio:
Auctioning Off Budgets in Procurement.
In: The RAND Journal of Economics. Vol. 56 (2025) Issue 4 . - pp. 655-667.
ISSN 1756-2171
DOI: https://doi.org/10.1111/1756-2171.70028

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Abstract in another language

This article investigates a multi-unit pay-as-bid procurement auction where the auctioneer fixes total spending and maximizes the quantity procured with their predetermined, secret budget. Previous literature has analyzed fixed-quantity auctions, where the traded quantity is fixed but unknown to the bidders. Compared to such auctions, budget auctions lower the auctioneer’s costs by introducing an additional interaction between a bidder’s bids; bidders not only weigh a higher profit margin on a unit against a lower probability of supplying that unit; a higher margin on some unit also reduces the probability that the budget suffices to procure more units from the bidder.