Balancing the Bids, Solutions for Unit Price Auctions

Sander Renes

No 11-047/1, Tinbergen Institute Discussion Papers from Tinbergen Institute

Abstract: Many organizations use procurement tenders to buy large amounts of goods and services. Especially in the public sector the use of these reverse auctions has grown rapidly over the past decades. For the (reverse) unit price auction experience as well as theory have shown that they can attract skewed/unbalanced bids, i.e. bids where the price structure is distorted to take advantage of estimation errors. This paper shows that by either allowing for some secrecy or post tender competition, incentives in unit price auction change in such a way that can make bid skewing disappear.

Keywords: unit price auctions; procurement; skewed bids; unbalanced bidding; post tender competition; split award auction (search for similar items in EconPapers)
JEL-codes: D44 K00 L38 (search for similar items in EconPapers)
Date: 2011-03-01
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Persistent link: https://EconPapers.repec.org/RePEc:tin:wpaper:20110047

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