This paper analyzes optimal auction design when delivery of supply is uncertain. We consider a buyer facing multiple potential suppliers, each having an associated (exogenous) reliability that quantifies its risk of supply failure. We design optimal mechanisms that depend on the buyer's level of...

To stay abreast of current supply-market pricing, it is common for procurement managers to frequently organize auctions among a pool of qualified suppliers (the supply base). Sole awards can alienate losing suppliers and cause them to defect from the supply base. To maintain the supply base and...