The Role of Quality in Service Markets Organized as Multi-Attribute Auctions

Elena Krasnokutskaya (), Kyungchul Song () and Xun Tang
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Kyungchul Song: Department of Economics, University of British Columbia

PIER Working Paper Archive from Penn Institute for Economic Research, Department of Economics, University of Pennsylvania

Abstract: We develop an empirical methodology to study markets for services. These markets are typically organized as multi-attribute auctions in which buyers take into account seller's price as well as various characteristics, including quality. Our identification and estimation strategies exploit observed buyers' and sellers' decisions to recover the distribution of sellers' qualities, the distribution of seller's costs conditional on quality, and the distribution of buyers' tastes. Our empirical results from the on-line market for programming services confirm that quality plays an important role. We use our estimates to study the effect of licensing restrictions and to assess the loss of value from using standard rather than multi-attribute auctions as is common in public procurement.

Keywords: quality; services; licensing; procurement; multi-attribute auctions; identification; unobserved heterogeneity; unobserved buyers'tastes; participation in auctions (search for similar items in EconPapers)
JEL-codes: C14 C18 D22 D44 D82 L15 L86 (search for similar items in EconPapers)
Pages: 80 pages
Date: 2013-06-10
New Economics Papers: this item is included in nep-com
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Citations: View citations in EconPapers (6)

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