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Coordination in Split Award Auctions

James J. Anton and Dennis A. Yao
The Quarterly Journal of Economics
Vol. 107, No. 2 (May, 1992), pp. 681-707
Published by: Oxford University Press
Stable URL: http://www.jstor.org/stable/2118486
Page Count: 27
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Coordination in Split Award Auctions
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Abstract

We analyze split award procurement auctions in which a buyer divides full production between two suppliers or awards all production to a single supplier, and suppliers have private cost information. An intriguing feature of split awards is that the equilibrium bids are implicitly coordinated. Because a split award price is the sum of offered split prices, each supplier can unilaterally veto a split award by bidding very high for the split. The need to coordinate is reflected in a split price that does not vary with private information. We also explore conditions under which split award auctions may be preferred to winner-take-all auctions.

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