Comparing First and Second Price Auctions with Asymmetric Bidders

We study procurement auctions in which, as is common in practice, a group of sellers (incumbents, qualified bidders) is given an advantage, based, for example, on better reliability, quality, or incumbency status. We show conditions under which for any given first price handicap auction, there is a simple second-price design which dominates it. This generalizes a previous result for the case of an auction with one insider and one outsider (Mares and Swinkels in J Econ Theory, 2013) and sharpens our understanding of the classical result by Maskin and Riley (Rev Econ Stud 67:413–438, 2000).