An Experimental Study of Japanese Procurement Auctions with Endogenous Minimum Prices

Kenju Akai,, Tatsuyoshi Saijo and Shigehiro Serizawa

ISER Discussion Paper from Institute of Social and Economic Research, The University of Osaka

Abstract: Several Japanese local governments started to add endogenous minimum prices to firstprice auctions in their public procurements. Any bid less than the endogenous minimum price is referred to as abnormally low and is excluded from the procurement procedure. The endogenous minimum price is generally calculated as 80% to 90% of the average of some of the lowest bids or all bids. Therefore, producers who join this new institution have incentives to raise their bids and pull the endogenous minimum price to exclude others. We experimentally evaluate the performance of this new institution relative to the standard first-price auction which do not have any minimum price. We find that winning prices of this new institution (i) coincide with the ones of the standard first-price auction and are close to the production cost under our identical cost condition, and (ii) are higher than the ones of the standard first-price auction and diverge from the lowest production cost under our different cost condition when subjectsf identifications and all their bids are revealed.

Date: 2009-06
New Economics Papers: this item is included in nep-exp
References: Add references at CitEc
Citations:

Downloads: (external link)
https://www.iser.osaka-u.ac.jp/static/resources/docs/dp/2009/DP0743.pdf

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:dpr:wpaper:0743

Access Statistics for this paper

More papers in ISER Discussion Paper from Institute of Social and Economic Research, The University of Osaka Contact information at EDIRC.
Bibliographic data for series maintained by Librarian ().