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A STUDY OF PARTICIPATION IN DYNAMIC AUCTIONS
Author(s) -
Groeger Joachim R.
Publication year - 2014
Publication title -
international economic review
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 2.658
H-Index - 86
eISSN - 1468-2354
pISSN - 0020-6598
DOI - 10.1111/iere.12085
Subject(s) - bidding , common value auction , microeconomics , competition (biology) , procurement , economics , business , industrial organization , marketing , ecology , biology
This article studies repeated entry and bidding decisions in construction procurement auctions. I find evidence in the data that suggests the presence of significant cost savings from entering contracts of the same type. I estimate a dynamic auction model to measure the gains to experience for bidders. I allow for endogenous entry, synergies in entry, and unobserved auction heterogeneity. I find that a bidder can halve entry costs by focusing on specific contract types. An auctioneer can increase competition by awarding contracts of the same type in sequence. As a result, procurement costs for each contract can be lowered by 7%, a saving of $110,000.