Title

Multiple Source Procurement Competitions

Publication Type

Journal Article

Publication Date

1991

Abstract

Relationships between buying and selling organizations in business markets are varied and complex. One important relationship is procurement, or the type of alliance that buyers form with sellers to fulfill their purchasing needs. Multiple sourcing is often proposed to prevent a variety of procurement problems. We develop a bidding model to investigate the effect of multiple sourcing on competitive behavior prior to supplier selection. The model treats the number of bidders (and the decision to bid) endogenously. This distinctive feature allows us to show that the distribution of the number of bids is not independent of the competition type. Most previous models have not considered this question at all. Although multiple sourcing does increase participation in a bidding competition, we show that it can lead to strategic pre-award price increases that can mitigate the effects of the advantages stressed by most previous analyses of post-award supplier management.

Discipline

Business

Research Areas

Operations Management

Publication

Marketing Science

Volume

10

Issue

3

First Page

246

ISSN

0732-2399

This document is currently not available here.

Share

COinS