Suppliers often make proactive investments to strategically position themselves to win contracts with a large buyer. Such investments reduce the suppliers' variable costs of serving the buyer's demand. We show that an auction mechanism does not always benefit the buyer, the supply chain, or the...

This paper examines pre-auction investments made by asymmetric agents that compete for a supply contract from a monopolist principal. Agents are privately aware of their managerial efficiencies which determine how well they can leverage fixed investments to reduce their variable costs for...

Suppliers often make proactive investments in capacity to strategically position themselves to win a contract with a monopolist buyer. Such investments reduce the suppliers' variable costs of serving the buyer's demand. We show that an auction mechanism does not always benefit the...