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- Publisher Website: 10.1287/msom.2014.0477
- Scopus: eid_2-s2.0-84901746289
- WOS: WOS:000343747500011
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Article: Bid-taker power and supply base diversification
Title | Bid-taker power and supply base diversification |
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Authors | |
Keywords | Procurement auctions Supply base design Bid-taker power |
Issue Date | 2014 |
Citation | Manufacturing and Service Operations Management, 2014, v. 16, n. 2, p. 300-314 How to Cite? |
Abstract | We study a buyer who periodically auctions off short-term supply contracts among her supply base. To mitigate significant cost shocks to procurement, the buyer can diversify her supply base by selecting suppliers from different regions. We find that the buyer's decision to diversify depends on her bid-taker power-that is, her ability to choose the auction mechanism. At one extreme, when the buyer has full bid-taker power and thus can dictatorially implement the optimal mechanism, she always prefers to diversify. At the other extreme, when the buyer uses a reverse English auction with no reserve price due to her lack of bid-taker power, she generally prefers to protect herself against potential price escalation from cost-advantaged suppliers by diversifying less. The managerial insight is that the more bid-taker power the buyer has to control price escalation from cost-advantaged suppliers the more she prefers a diversified supply base. This insight is shown to be robust to correlation between regional costs, ex ante asymmetry between regions, and intermediate levels of bid-taker power. © 2014 INFORMS. |
Persistent Identifier | http://hdl.handle.net/10722/280144 |
ISSN | 2023 Impact Factor: 4.8 2023 SCImago Journal Rankings: 5.466 |
ISI Accession Number ID |
DC Field | Value | Language |
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dc.contributor.author | Wan, Zhixi | - |
dc.contributor.author | Beil, Damian R. | - |
dc.date.accessioned | 2020-01-06T02:07:30Z | - |
dc.date.available | 2020-01-06T02:07:30Z | - |
dc.date.issued | 2014 | - |
dc.identifier.citation | Manufacturing and Service Operations Management, 2014, v. 16, n. 2, p. 300-314 | - |
dc.identifier.issn | 1523-4614 | - |
dc.identifier.uri | http://hdl.handle.net/10722/280144 | - |
dc.description.abstract | We study a buyer who periodically auctions off short-term supply contracts among her supply base. To mitigate significant cost shocks to procurement, the buyer can diversify her supply base by selecting suppliers from different regions. We find that the buyer's decision to diversify depends on her bid-taker power-that is, her ability to choose the auction mechanism. At one extreme, when the buyer has full bid-taker power and thus can dictatorially implement the optimal mechanism, she always prefers to diversify. At the other extreme, when the buyer uses a reverse English auction with no reserve price due to her lack of bid-taker power, she generally prefers to protect herself against potential price escalation from cost-advantaged suppliers by diversifying less. The managerial insight is that the more bid-taker power the buyer has to control price escalation from cost-advantaged suppliers the more she prefers a diversified supply base. This insight is shown to be robust to correlation between regional costs, ex ante asymmetry between regions, and intermediate levels of bid-taker power. © 2014 INFORMS. | - |
dc.language | eng | - |
dc.relation.ispartof | Manufacturing and Service Operations Management | - |
dc.subject | Procurement auctions | - |
dc.subject | Supply base design | - |
dc.subject | Bid-taker power | - |
dc.title | Bid-taker power and supply base diversification | - |
dc.type | Article | - |
dc.description.nature | link_to_subscribed_fulltext | - |
dc.identifier.doi | 10.1287/msom.2014.0477 | - |
dc.identifier.scopus | eid_2-s2.0-84901746289 | - |
dc.identifier.volume | 16 | - |
dc.identifier.issue | 2 | - |
dc.identifier.spage | 300 | - |
dc.identifier.epage | 314 | - |
dc.identifier.eissn | 1526-5498 | - |
dc.identifier.isi | WOS:000343747500011 | - |
dc.identifier.issnl | 1523-4614 | - |