Strategic design under uncertain evaluations : structural analysis of design-build auctions

Takahashi, Hidenori

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URN: urn:nbn:de:bsz:180-madoc-388821
Document Type: Working paper
Year of publication: 2015
The title of a journal, publication series: Working Paper Series
Volume: 15-08
Place of publication: Mannheim
Publication language: English
Institution: School of Law and Economics > Angewandte Mikroökonomische Theorie (Juniorprofessur) (Takahashi 2015-2018)
MADOC publication series: Department of Economics > Working Paper Series
Subject: 330 Economics
Abstract: I investigate firms' competition over price and product design under uncertain design evaluations in the context of Design-Build (DB) auctions. Reviewers' design evaluations contain uncertainty from a bidder's perspective, leading luck to curtail differences in firms' chances of winning. I model bidders' behavior and derive semiparametric identification of the model primitives. Uncertain evaluations worsen the expected price of design quality, and exacerbate an auctioneer's uncertainty in auction outcomes. A simple adjustment in the auction mechanism may completely shut down the impact of uncertain evaluations on bidding incentives, restoring efficient allocations of projects.

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