Block sourcing plus

Jozsef Sakovics; Daniel Cardona; Lluis Bru

doi:10.1016/j.ejor.2022.06.039

Block sourcing plus

Jozsef Sakovics, Daniel Cardona, Lluis Bru

School of Economics

Research output: Contribution to journal › Article › peer-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 language	English
Pages (from-to)	1130-1140
Number of pages	11
Journal	European Journal of Operational Research
Volume	305
Issue number	3
Early online date	27 Jun 2022
DOIs	https://doi.org/10.1016/j.ejor.2022.06.039
Publication status	Published - 16 Mar 2023

Keywords / Materials (for Non-textual outputs)

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

Access to Document

10.1016/j.ejor.2022.06.039Licence: Creative Commons: Attribution (CC-BY)

BruEtal2022EJORBlockSourcingPlusFinal published version, 751 KBLicence: Creative Commons: Attribution (CC-BY)

Transparency in Procurement: The design and use of information in trading mechanisms.
Sakovics, J. & Visschers, L.
ESRC
1/01/16 → 31/12/18
Project: Research

Cite this

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title = "Block sourcing plus",

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.",

keywords = "supply chain management, multi-sourcing, split-award auction, two-stage procurement",

author = "Jozsef Sakovics and Daniel Cardona and Lluis Bru",

note = "Funding Information: We thank three anonymous referees, Roberto Burguet, Gianni De Fraja, Ed Hopkins, Carmen Matutes, Ina Taneva, Mike Waterson and the audiences at EARIE 2018, Jornadas de Econom{\'i}a Industrial 2018, Simposio de An{\'a}lisis Econ{\'o}mico 2018 and of seminars at UIB and UoE for their comments. Financial support from the Spanish government through grants PID2019-107833GB-I00 MCIN/AEI/10.13039/501100011033, PID2020-115018RB-C33 and BG20/00079, and from the ESRC through grant ES/N00776X/1 is gratefully acknowledged. Publisher Copyright: {\textcopyright} 2022 The Author(s)",

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doi = "10.1016/j.ejor.2022.06.039",

language = "English",

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AU - Sakovics, Jozsef

AU - Cardona, Daniel

AU - Bru, Lluis

N1 - Funding Information: We thank three anonymous referees, Roberto Burguet, Gianni De Fraja, Ed Hopkins, Carmen Matutes, Ina Taneva, Mike Waterson and the audiences at EARIE 2018, Jornadas de Economía Industrial 2018, Simposio de Análisis Económico 2018 and of seminars at UIB and UoE for their comments. Financial support from the Spanish government through grants PID2019-107833GB-I00 MCIN/AEI/10.13039/501100011033, PID2020-115018RB-C33 and BG20/00079, and from the ESRC through grant ES/N00776X/1 is gratefully acknowledged. Publisher Copyright: © 2022 The Author(s)

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N2 - 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.

AB - 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.

KW - supply chain management

KW - multi-sourcing

KW - split-award auction

KW - two-stage procurement

U2 - 10.1016/j.ejor.2022.06.039

DO - 10.1016/j.ejor.2022.06.039

M3 - Article

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EP - 1140

JO - European Journal of Operational Research

JF - European Journal of Operational Research

IS - 3

ER -

Block sourcing plus

Abstract

Keywords / Materials (for Non-textual outputs)

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Projects

Transparency in Procurement: The design and use of information in trading mechanisms.

Cite this