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CAPACITY CONSTRAINTS AND INFORMATION REVELATION IN PROCUREMENT AUCTIONS
Author(s) -
Saini Viplav,
Suter Jordan F.
Publication year - 2015
Publication title -
economic inquiry
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.823
H-Index - 72
eISSN - 1465-7295
pISSN - 0095-2583
DOI - 10.1111/ecin.12158
Subject(s) - procurement , common value auction , microeconomics , economics , collusion , english auction , proxy bid , vickrey auction , auction theory , management
We utilize laboratory experiments to study behavior in sequential procurement auctions where winning an auction round increases a bidder's future costs. The game admits competitive as well as bid‐rotation style collusive equilibria. We find that (a) bidders show some propensity to account for the opportunity cost of winning an auction, but underestimate its magnitude; (b) revealing all bids (instead of only the winning bid) after each round leads to dramatically higher procurement costs. The rise in procurement costs is accompanied by an increase in very high (extreme) bids, a fraction of which appear to be collusive in nature . ( JEL C91, D44, L44)