Strategic design under uncertain evaluations: structural analysis of design-build auctions

Hidenori Takahashi

No 15-08, Working Papers from University of Mannheim, Department of Economics

Abstract: I investigate firms' competition over price and product design under uncertain design evaluations in the context of Design-Build (DB) auctions. Reviewers' design evaluations contain uncertainty from a bidder's perspective, leading luck to curtail differences in firms' chances of winning. I model bidders' behavior and derive semiparametric identification of the model primitives. Uncertain evaluations worsen the expected price of design quality, and exacerbate an auctioneer's uncertainty in auction outcomes. A simple adjustment in the auction mechanism may completely shut down the impact of uncertain evaluations on bidding incentives, restoring efficient allocations of projects.

Date: 2015
New Economics Papers: this item is included in nep-com and nep-ppm
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Citations: View citations in EconPapers (8)

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