Block sourcing plus

Jozsef Sakovics, Daniel Cardona, Lluis Bru

Research output: Contribution to journalArticlepeer-review

Abstract

We study how a buyer unable to (directly) price discriminate should satisfy his demand for a divisible good, produced with increasing marginal cost. As expected, we find that dynamic pricing cannot, while auctioning contracts for lots (block sourcing) need not, lead to a higher buyer surplus than setting a price (classical monopsony). However, we show that the optimal combination of block sourcing with setting a price for the residual supply is always strictly superior. Thus, we provide a rationale for two-stage contracting even in the absence of uncertainty.
Original languageEnglish
Number of pages30
JournalEuropean Journal of Operational Research
Early online date27 Jun 2022
DOIs
Publication statusE-pub ahead of print - 27 Jun 2022

Keywords

  • supply chain management
  • multi-sourcing
  • split-award auction
  • two-stage procurement

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