A Comparison Of Multidimensional Procurement Auction And Multidimensional Procurement Bargaining

In recent years, governments and corporations are increasingly purchasing goods through the auction, procurement auction to the government and the corporation brings great value. At the same time, it also exposes many problems. Bargaining, as the ancient way of procurement, in the contemporary social economic life is still normal, and is widely used. So how to choose these two ways, either governments and corporations want to know the answer to this question, it is necessary to carry out further study.As common and effective ways of selecting suppliers in procurement, auction and bargaining both have their supports in the current theory, from the perspective of the purchaser. In the theory of optimal auctions, the auctioneer is regarded as a monopolist who has"full bargaining power", with the constraint that she has no exact information about all bidders'cost type. So, the amount of bidders in any procurement auction plays most important role in the expected revenue of auctioneer. On the contrary, bargaining outcome is influenced by many factors from two parties, such as the tactics employed by bargainers, discount rates and outside options of one or two players etc.. Generalized Nash bargaining model is a facility to take into account all these factors within the bargaining power. So the strength of bargaining power to bargain directly affects the equilibrium outcome. By using the classical multidimensional auction model in Che and multidimensional asymmetric Nash bargaining model, to compare the expected revenue of auction with the earnings of bargaining, it is found that the boundary of the two mechanisms relates to the power of bargaining and the number of bidders. By dividing the interval of the two, the boundary conditions of auction and bargaining and their respective appropriate ranges are also found. The article points out that in the procurement these two methods must be chosen scientifically, not freely, and should not be mandatory, regardless of the situation in some way. The exact choice of procurement method should be negotiated based on specific circumstances of bargaining power and the number of bidders, and the article also challenges that to force the governments procuring by auctions, as this may result in loss of procurement efficiency .