How the auction design influences procurement prices: an experiment


Ehrhart, Karl-Martin ; Ott, Marion


[img]
Preview
PDF
dp19061.pdf - Published

Download (394kB)

URL: https://madoc.bib.uni-mannheim.de/54500
URN: urn:nbn:de:bsz:180-madoc-545001
Document Type: Working paper
Year of publication: 2019
The title of a journal, publication series: ZEW Discussion Papers
Volume: 19-061
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 , H57 , D91 , C92,
Keywords (English): Procurement auction , experiment , WTP-WTA disparity , reference-dependence
Abstract: The targeted design of auctions has to take behavioral regularities into account. This paper explores whether procurement auction formats can take advantage of bidders' willingness-to-pay-willingness-to-accept disparity. In a laboratory experiment, we compare four different second-price auction formats for procuring a good. The four formats are a sealed-bid auction and three different descending-clock auctions. We assume that a bidder's willingness-to-accept exceeds his willingness-to-pay and that, depending on the auction format, a bidder's reference-state shifts such that the bidder's perspective moves from a willingness-to-accept perspective towards a willingness-to-pay perspective, thus inducing aggressive bids. In line with the prediction, auction prices decline across the four formats. In particular, we observe the lowest prices in those two clock auction formats that, at every auction stage, select a bidder as the current leading bidder. We conclude that mechanisms influence the reference state and that auctions that foster reference-state shifts lead to lower payments for the buyer. These results support and generalize findings on sales auctions. However, not all of our findings on procurement auctions mirror findings on sales auctions. Bidders overbid in sealed-bid procurement auctions, which does not mirror the commonly observed overbidding in sealed-bid sales auctions.

Das Dokument wird vom Publikationsserver der Universitätsbibliothek Mannheim bereitgestellt.




+ Citation Example and Export

Ehrhart, Karl-Martin ; Ott, Marion (2019) How the auction design influences procurement prices: an experiment. Open Access ZEW Discussion Papers Mannheim 19-061 [Working paper]
[img]
Preview


+ Search Authors in

+ Download Statistics

Downloads per month over past year

View more statistics



You have found an error? Please let us know about your desired correction here: E-Mail


Actions (login required)

Show item Show item