Procurement Auctions for Differentiated Goods

J. Swarthout and Jason Shachat

No 629, Econometric Society 2004 Far Eastern Meetings from Econometric Society

Abstract: We consider two mechanisms to procure differentiated goods: a request for quote and an English auction with bidding credits. In the request for quote, each seller submits a price and the inherent quality of his good. Then the buyer selects the seller who offers the greatest difference in quality and price. In the English auction with bidding credits, the buyer assigns a bidding credit to each seller conditional upon the quality of the seller’s good. Then the sellers compete in an English auction with the winner receiving the auction price and his bidding credit. Game theoretic models predict the request for quote is socially efficient but the English auction with bidding credits is not. The optimal bidding credit assignment under compensates for quality advantages, creating a market distortion in which the buyer captures surplus at the expense of the seller’s profit and social efficiency. In experiments, the request for quote is less efficient than the English auctions with bidding credits. Moreover, both the buyer and seller receive more surplus in the English auction with bidding credits

Keywords: Auctions; Product Differentiation; Experiment (search for similar items in EconPapers)
JEL-codes: C72 C92 (search for similar items in EconPapers)
Date: 2004-08-11
New Economics Papers: this item is included in nep-com and nep-exp
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

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Related works:
Journal Article: Procurement Auctions for Differentiated Goods (2010)
Working Paper: Procurement Auctions for Differentiated Goods (2009)
Working Paper: Procurement Auctions for Differentiated Goods (2003)
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