Procurement Auction

A procurement auction is an auction held to buy something instead of sell something. The government and large businesses commonly hold procurement auctions to purchase products and services. The most common form of a procurement auction awards the sale to the lowest bidder (the seller who offers the cheapest price). In such cases, minor modifications of standard first-price auction format will work for a procurement auction, and such auctions can be analyzed with standard auction theory. In other cases, being the low bidder is not enough, and there are additional concerns about quality, which require different mechanisms and theory.