The Impact of Capacity Costs on Bidding Strategies in Procurement Auctions

Posted: 18 Mar 1999

See all articles by Jörg Budde

Jörg Budde

University of Bonn - Economic Science Area

Robert F. Göx

University of Zurich - Managerial Accounting; University of Zurich - Faculty of Economics, Business Administration and Information Technology

Abstract

This paper analyzes the impact of capacity costs on bidding strategies of firms participating in procurement auctions. More efficient firms will invest in advance due to their high probability of winning the auction while less efficient bidders prefer to wait with their investments until the outcome of the auction is known. However, in equilibrium both types of firms include a coverage for their investment costs into their bids and therefore adopt a full cost pricing policy.

JEL Classification: D44, L11, L14, M40, M46

Suggested Citation

Budde, Jörg and Goex, Robert F., The Impact of Capacity Costs on Bidding Strategies in Procurement Auctions. Available at SSRN: https://ssrn.com/abstract=156808

Jörg Budde

University of Bonn - Economic Science Area ( email )

Adenauerallee 24-42
D-53113 Bonn
Germany
+49-(0)228-73-9284 (Phone)
+49-(0)228-73-1785 (Fax)

Robert F. Goex (Contact Author)

University of Zurich - Managerial Accounting ( email )

Plattenstrasse 14
Zurich, CH-8032
Switzerland

University of Zurich - Faculty of Economics, Business Administration and Information Technology ( email )

Plattenstrasse 14
Zürich, 8032
Switzerland

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