Collusion in Dynamic Buyer-Determined Reverse Auctions

Nicolas Fugger, Elena Katok () and Achim Wambach

Management Science, 2016, vol. 62, issue 2, 518-533

Abstract: Although binding reverse auctions have attracted a good deal of interest in the academic literature, in practice, dynamic nonbinding reverse auctions are the norm in procurement. In those, suppliers submit price quotes and can respond to quotes of their competitors during a live auction event. However, the lowest quote does not necessarily determine the winner. The buyer decides after the contest, taking further supplier information into account, on who will be awarded the contract. We show, both theoretically and empirically, that this bidding format enables suppliers to collude, thus leading to noncompetitive prices. This paper was accepted by Teck-Hua Ho, behavioral economics.

Keywords: bidding; procurement; reverse auctions; multiattribute auctions; behavioral game theory; experimental economics (search for similar items in EconPapers)
Date: 2016
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Citations: View citations in EconPapers (21)

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Persistent link: https://EconPapers.repec.org/RePEc:inm:ormnsc:v:62:y:2016:i:2:p:518-533

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