Evolutionary stability of auction and supply chain contracting: An analysis based on disintermediation in the Indian tea supply chains

The purpose of this paper is to show that evolutionary stable market equilibrium is achievable through complete disintermediation of auctioneers if the option of bargaining-based supply chain contracting exists. The paper analyzes the evolutionary dynamics of a market that caters both the scopes of auction-intermediation and supply chain contracting to a set of homogeneous buyers and sellers. The motivation of this work developed from the contradiction between the theoretical framework of Lu and McAfee (1996) that identifies auction to be evolutionary stable over bargaining and the real instance of sustained disintermediation of auctioneers in the world’s largest tea industry in India where supply chain contracting is the other option of trading.