An Experimental Study of Bidding Behavior in Subcontract Auctions

Jun Nakabayashi and Naoki Watanabe

Tsukuba Economics Working Papers from Faculty of Humanities and Social Sciences, University of Tsukuba

Abstract: It is commonly observed in practices that prime contractors solicit subcontract bids, prior to submitting their bids in procurement auctions: the auctioneers in subcontract auctions will become bidders in a procurement auction. This point is remarkably different from the standard theory of procurement auction. We presented a simple model of such subcontract auctions and conducted a laboratory experiment to examine the bidding behavior derived theoretically. We observed that in the subcontract auction, (1) subjects bid following the equilibrium bidding function derived theoretically, (2) the revenue equivalence between first-price and second-price mechanisms breaks down, and (3) the first-price mechanism more likely achieves ex post efficient allocations than the second-price mechanism.

Date: 2010-12
New Economics Papers: this item is included in nep-exp and nep-gth
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

Downloads: (external link)
https://pepp.hass.tsukuba.ac.jp/RePEc/2010-009.pdf (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:tsu:tewpjp:2010-009

Access Statistics for this paper

More papers in Tsukuba Economics Working Papers from Faculty of Humanities and Social Sciences, University of Tsukuba Contact information at EDIRC.
Bibliographic data for series maintained by Yoshinori Kurokawa ().