Procurement design with loss averse bidders

Fugger, Nicolas ; Gillen, Philippe ; Riehm, Tobias

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URN: urn:nbn:de:bsz:180-madoc-544990
Document Type: Working paper
Year of publication: 2019
The title of a journal, publication series: ZEW Discussion Papers
Volume: 19-060
Place of publication: Mannheim
Publication language: English
Institution: Sonstige Einrichtungen > ZEW - Leibniz-Zentrum für Europäische Wirtschaftsforschung
MADOC publication series: Veröffentlichungen des ZEW (Leibniz-Zentrum für Europäische Wirtschaftsforschung) > ZEW Discussion Papers
Subject: 330 Economics
Classification: JEL: D44 , D47 , D90,
Keywords (English): Auctions , experiment , loss aversion , preferences
Abstract: We show that it is beneficial for a buyer to conduct a multi-stage mechanism if bidders are loss averse. In a first step, we derive a revenue equivalence principle. Fixing the multi-stage structure, the revenue is independent of the chosen payment rule. Secondly, we introduce a simple two-stage mechanism which always leads to a decrease in procurement costs compared to any single-stage auction. Finally we derive the optimal efficient two-stage mechanism.

Das Dokument wird vom Publikationsserver der Universitätsbibliothek Mannheim bereitgestellt.

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