Procurement Auctions for Differentiated Goods

Jason Shachat and J. Swarthout

No 2006-15, Experimental Economics Center Working Paper Series from Experimental Economics Center, Andrew Young School of Policy Studies, Georgia State University

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 sellerâ??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 sellerâ??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.

JEL-codes: C7 C9 L1 (search for similar items in EconPapers)
Pages: 33
Date: 2003-01, Revised 2009-04
References: Add references at CitEc
Citations: View citations in EconPapers (4)

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http://excen.gsu.edu/workingpapers/GSU_EXCEN_WP_2006-15.pdf First version, 2006 (application/pdf)
http://excen.gsu.edu/workingpapers/GSU_EXCEN_WP_2009-07.pdf Revised version, 2009 (application/pdf)

Related works:
Journal Article: Procurement Auctions for Differentiated Goods (2010)
Working Paper: Procurement Auctions for Differentiated Goods (2004)
Working Paper: Procurement Auctions for Differentiated Goods (2003)
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Persistent link: https://EconPapers.repec.org/RePEc:exc:wpaper:2006-15

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