A Sealed-Bid Two-Attribute Yardstick Auction Without Prior Scoring

Jens Hougaard (), Kurt Nielsen () and Athanasios Papakonstantinou ()
Additional contact information
Kurt Nielsen: University of Copenhagen

Group Decision and Negotiation, 2016, vol. 25, issue 4, No 7, 827-843

Abstract: Abstract We analyze a two-attribute single item procurement auction that uses yardstick competition to settle prices. The auction simplifies the procurement process by reducing the principal’s articulation of preferences to simply choosing the most preferred offer as if it was a market with posted prices. This is done simply by replacing the submitted sealed bids by yardstick bids, computed by a linear weighting of the other participants’ bids. We show that there is only one type of Nash equilibria where some agents may win the auction by submitting a zero price-bid. Using a simulation study we demonstrate that following this type of equilibrium behavior often leads to winner’s curse. The simulations show that in auctions with more than 12 participants the chance of facing winner’s curse is around 95 %. Truthful reporting, on the other hand, does not constitute a Nash equilibrium but it is ex post individually rational. Using a simulation study we demonstrate that truthful bidding may indeed represent some kind of focal point.

Keywords: Multi-attribute auctions; Yardstick competition; Articulation of preferences (search for similar items in EconPapers)
Date: 2016
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (3)

Downloads: (external link)
http://link.springer.com/10.1007/s10726-015-9463-5 Abstract (text/html)
Access to the full text of the articles in this series is restricted.

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:spr:grdene:v:25:y:2016:i:4:d:10.1007_s10726-015-9463-5

Ordering information: This journal article can be ordered from
http://www.springer.com/journal/10726/PS2

DOI: 10.1007/s10726-015-9463-5

Access Statistics for this article

Group Decision and Negotiation is currently edited by Gregory E. Kersten

More articles in Group Decision and Negotiation from Springer
Bibliographic data for series maintained by Sonal Shukla () and Springer Nature Abstracting and Indexing ().