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Setting reserve prices in repeated procurement auctions

Sümeyra Atmaca, Riccardo Camboni (), Elena Podkolzina, Koen Schoors and Paola Valbonesi ()
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Riccardo Camboni: University of Padova
Elena Podkolzina: HSE-NRU
Paola Valbonesi: University of Padova

No 289, "Marco Fanno" Working Papers from Dipartimento di Scienze Economiche "Marco Fanno"

Abstract: We use a large dataset of Russian public procurement auctions for standard gasoline over the period 2011-2013, to investigate how buyers set the reserve price - i.e. the buyer’s announced maximum willingness to pay for the good awarded. We provide empirical evidence that repeated past contracts between a buyer and a supplier affect the reserve price set by this buyer in future auctions where the same supplier takes part and wins. Specifically, we find that in these auctions the reserve price, the level of competition, and the winning unit price are lower than in the average auction in the dataset. We conjecture that, in setting the reserve price for a new auction, public buyers exploit information gained about the winners of previous auctions. This intuition is supported by empirically studying the reserve price in a dynamic framework, which allows buyers to take into account information from previous procurement transactions with given suppliers. Finally, we show that our empirical results are in line with a simple theoretical setting in which the buyer collects information about one supplier’s costs and exploits this in setting the reserve price in future auctions.

Keywords: Publicprocurement; First-priceauction; Buyer-supplier repeated interactions; Reserve price (search for similar items in EconPapers)
JEL-codes: D44 H57 (search for similar items in EconPapers)
Pages: 18 pages
Date: 2022-10
New Economics Papers: this item is included in nep-cis, nep-com, nep-cta, nep-des and nep-gth
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