Comparison Of Competitive Bidding Strategies In Procurement With Asymmetric Firms

This paper analyses the process of procurement via competitive bidding. In the model specified, firms' technological parameters are private information, and, their distributions are asymmetric in some sense of stochastic dominance. As conclusion, pricing strategies are compared, either of the two firms of different types in one equilibrium, or of the same type of firm under symmetric and asymmetric equilibriums. All the work bases mainly on results in the study of auction theory in Maskin and Riley(2000b), since the process of procurement is nothing but an auction except that in this case the bidders compete for the right to sell their product and it is the one bidding lowest who wins the contract. In fact, an auction is always understood to include the process of procurement via competitive bidding. Admittedly, this paper just builds an one-to-one correspondence. To make the point apparent, everything, including even the sequence number of the lemma, propositions, corollary etc., are kept in line with the corresponding part of the original Maskin and Riley(2000b).