Multi-round procurement auctions with secret reserve prices: theory and evidence

Lu Ji and Tong Li
Additional contact information
Lu Ji: Department of Economics, Vanderbilt University, Nashville, Tennessee, USA, Postal: Department of Economics, Vanderbilt University, Nashville, Tennessee, USA

Journal of Applied Econometrics, 2008, vol. 23, issue 7, 897-923

Abstract: When a secret reserve price is used in an auction, the auctioneer cannot guarantee that the good can be sold out at the auction, and can reauction the unsold objects in the next round. Motivated by this interesting feature observed in the procurement auctions organized by the Indiana Department of Transportation, we construct a dynamic bidding model in multi-round procurement auctions with secret reserve prices and evaluate how the release of the auctioneer's reserve price affects bidders' bidding behavior and the auctioneer's expected payment. Our theoretical model predicts that the equilibrium bids uniformly decline over stages, and the numerical analysis of our model indicates that hiding the reserve price may be better than announcing it for the auctioneer under some specifications of underlying distributions. We develop an empirical model with bidders' discount factor equal to zero to recover the unknown structural parameters and to conduct counterfactual analyses. Copyright © 2008 John Wiley & Sons, Ltd.

Date: 2008
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

Downloads: (external link)
http://hdl.handle.net/10.1002/jae.1031 Link to full text; subscription required (text/html)
http://qed.econ.queensu.ca:80/jae/2008-v23.7/ Supporting data files and programs (text/html)

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:jae:japmet:v:23:y:2008:i:7:p:897-923

Ordering information: This journal article can be ordered from
http://www3.intersci ... e.jsp?issn=0883-7252

DOI: 10.1002/jae.1031

Access Statistics for this article

Journal of Applied Econometrics is currently edited by M. Hashem Pesaran

More articles in Journal of Applied Econometrics from John Wiley & Sons, Ltd.
Bibliographic data for series maintained by Wiley-Blackwell Digital Licensing () and Christopher F. Baum ().