A Demsetz auction is a system which awards an exclusive contract to the agent bidding the lowest price. This is sometimes referred to "competition for the field." It is in contrast to "competition in the field," which calls for two or more agents to be granted the contract and provide the good or service competitively. Martin Ricketts writes that "under competitive conditions, the bid prices should fall until they just enable firms to achieve a normal return on capital." Disadvantages of a Demsetz auction include the fact that the entire risk associated with falling demand is borne by one agent and that the winner of the bid, once locked into the contract, may accumulate non-transferable know-how

Procedural knowledge

Procedural knowledge, also known as imperative knowledge, is the knowledge exercised in the performance of some task. See below for the specific meaning of this term in cognitive psychology and intellectual property law....

 that can then be used to gain leverage for contract renewal.

Demsetz auctions are often used to award contracts for public-private partnership

Public-private partnership

Public–private partnership describes a government service or private business venture which is funded and operated through a partnership of government and one or more private sector companies...

s for highway construction

Road

A road is a thoroughfare, route, or way on land between two places, which typically has been paved or otherwise improved to allow travel by some conveyance, including a horse, cart, or motor vehicle. Roads consist of one, or sometimes two, roadways each with one or more lanes and also any...

.