Procurement Bidding in First-Price and Second-Price Sealed Bid Common Value Auctions

Anders Lunander ()
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Anders Lunander: Department of Economics, Postal: Uppsala University, P.O. Box 513, SE-751 20 Uppsala, Sweden

No 1999:17, Working Paper Series from Uppsala University, Department of Economics

Abstract: Within the framework of the common value model, we examine the magnitude of the difference in expected outcome between first-price and second-price sealed bid auctions. The study is limited to two empirical specifications of bidders’ signals: Weibull and normal distribution. The optimal bid functions and the expected procurer’s cost under both auction formats are derived. Simulations are undertaken to analyze the impact that random draws of signals have on the differences in outcome from the two auction formats. Using estimates from structural estimation in previous empirical work on first-price auction data, where Weibull and normal distributions of signals have been applied, the hypothetical expected gain from switching from a first-price sealed bid auction to a second-price sealed bid auction mechanism is computed.

Keywords: Common value auctions; procurement; Vickrey auction (search for similar items in EconPapers)
JEL-codes: D44 (search for similar items in EconPapers)
Pages: 21 pages
Date: 1999-10-12
New Economics Papers: this item is included in nep-mic
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Published in Computational Economics, 2002, pages 227-244.

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