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PROCUREMENT EXPERIMENTS WITH UNKNOWN COSTS OF QUALITY
Author(s) -
Güth Werner,
IvanovaStenzel Radosveta,
Kröger Sabine
Publication year - 2006
Publication title -
pacific economic review
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.34
H-Index - 33
eISSN - 1468-0106
pISSN - 1361-374X
DOI - 10.1111/j.1468-0106.2006.00306.x
Subject(s) - profitability index , procurement , competition (biology) , common value auction , quality (philosophy) , microeconomics , reverse auction , economics , auction theory , eauction , vickrey–clarke–groves auction , english auction , industrial organization , business , finance , ecology , philosophy , management , epistemology , biology
. We experimentally examine the efficiency and profitability of two different procurement auctions allowing for quality differences across products. We compare the vector auction with more competition on the sellers’ side with a half‐auction, reflecting actual procurement practice – an auction for the cheaper variant and bargaining with the contractor about the additional cost of the better quality variant. Our main hypothesis, that buyers are better off when using the vector auction instead of the half‐auction, is confirmed when quality differences of variants are large and the uncertainty of the cost difference is also large.