Free Riding in Combinatorial First-Price Sealed-Bid Auctions

Maréchal François and Pierre-Henri Morand ()
Additional contact information
Maréchal François: CRESE, University of Franche-Comté, francois.marechal@univ-fcomte.fr

The B.E. Journal of Theoretical Economics, 2009, vol. 9, issue 1, 24

Abstract: We consider an allotted procurement contract awarded by means of a combinatorial first-price sealed-bid auction. Two small firms and a larger firm are competing. Each small firm is interested in a single lot whereas the large firm transmits a global offer. Under a specific informational framework, we derive the asymmetric combinatorial equilibrium bidding strategies and show that they exhibit a free-riding effect. We show that this effect is increasing with the level of uncertainty and decreasing with risk aversion. When all the firms are risk neutral or equally risk averse, the magnitude of the free-riding effect is unaffected by the division of the contract chosen by the public buyer. Nevertheless, when each firm exhibits its own risk aversion parameter, we find that the free-riding effect is reduced (resp. increased) as the more risk averse small firm competes for a larger (resp. smaller) part of the contract.

Keywords: free-riding; combinatorial auctions (search for similar items in EconPapers)
Date: 2009
References: Add references at CitEc
Citations: View citations in EconPapers (1)

Downloads: (external link)
https://doi.org/10.2202/1935-1704.1552 (text/html)
For access to full text, subscription to the journal or payment for the individual article is required.

Related works:
Working Paper: Free Riding in Combinatorial first-price sealed-bid Auctions (2009)
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:bpj:bejtec:v:9:y:2009:i:1:n:41

Ordering information: This journal article can be ordered from
https://www.degruyter.com/journal/key/bejte/html

DOI: 10.2202/1935-1704.1552

Access Statistics for this article

The B.E. Journal of Theoretical Economics is currently edited by Burkhard C. Schipper

More articles in The B.E. Journal of Theoretical Economics from De Gruyter
Bibliographic data for series maintained by Peter Golla ().