Concurrent Business and Buyer–Supplier Behavior in B2B Auctions: Evidence from Truckload Transportation

Abstract

Buyers often procure distinct goods and services from the same supplier. Accordingly, business exchanged in one setting may affect exchanges between the buyer and supplier in other settings. We study how business procured via online business‐to‐business (B2B) auctions is affected by business exchanged between the buyer and supplier concurrent to the auctions (concurrent business). Using two transactional datasets, one with auctions held by a large buyer of transportation services over a 4‐year period and another with the buyer's transactions with suppliers over the same time period but governed by long‐term contracts, we analyze whether the contractual business affects decisions made in the auctions. We find that the buyer's auction–invitation decisions are affected by a supplier's auction performance and the presence and magnitude of the concurrent business relationship, showing that relationships still matter when buyers use online B2B auctions for procurement. After the concurrent relationship ends, auction invitations eventually cease; this effect, however, is moderated by the supplier's performance in the auctions. Concurrent business also affects supplier decisions in the form of reference prices. When a buyer and supplier have a preexisting price for the service up for auction, the supplier at times substitutes that for their bid price, with considerable heterogeneity explained by a supplier's business model, market conditions, and the recent usage of the contract price in the concurrent relationship. The business relationship external to a B2B auction significantly affects the decisions made within an auction through multiple mechanisms.