Procurement Auctions for Differentiated Goods

Jason Shachat and J. Swarthout

Experimental from University Library of Munich, Germany

Abstract: We consider two mechanisms to procure differentiated goods: a request for quote and an English auction with bidding credits. In the request for quote, each seller submits a price and the inherent quality of his good. Then the buyer selects the seller who offers the greatest difference in quality and price. In the English auction with bidding credits, the buyer assigns a bidding credit to each seller conditional upon the quality of the seller’s good. Then the sellers compete in an English auction with the winner receiving the auction price and his bidding credit. Game theoretic models predict the request for quote is socially efficient but the English auction with bidding credits is not. The optimal bidding credit assignment under compensates for quality advantages, creating a market distortion in which the buyer captures surplus at the expense of the seller’s profit and social efficiency. In experiments, the request for quote is less efficient than the English auctions with bidding credits. Moreover, both the buyer and seller receive more surplus in the English auction with bidding credits.

JEL-codes: L (search for similar items in EconPapers)
Pages: 33 pages
Date: 2003-10-13
New Economics Papers: this item is included in nep-exp
Note: Type of Document - pdf; pages: 33
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Citations: View citations in EconPapers (8)

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Related works:
Journal Article: Procurement Auctions for Differentiated Goods (2010)
Working Paper: Procurement Auctions for Differentiated Goods (2009)
Working Paper: Procurement Auctions for Differentiated Goods (2004)
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Persistent link: https://EconPapers.repec.org/RePEc:wpa:wuwpex:0310004

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