Group Decision and Negotiation

, Volume 25, Issue 4, pp 827–843 | Cite as

A Sealed-Bid Two-Attribute Yardstick Auction Without Prior Scoring

  • Jens Leth Hougaard
  • Kurt Nielsen
  • Athanasios Papakonstantinou
Article

Abstract

We analyze a two-attribute single item procurement auction that uses yardstick competition to settle prices. The auction simplifies the procurement process by reducing the principal’s articulation of preferences to simply choosing the most preferred offer as if it was a market with posted prices. This is done simply by replacing the submitted sealed bids by yardstick bids, computed by a linear weighting of the other participants’ bids. We show that there is only one type of Nash equilibria where some agents may win the auction by submitting a zero price-bid. Using a simulation study we demonstrate that following this type of equilibrium behavior often leads to winner’s curse. The simulations show that in auctions with more than 12 participants the chance of facing winner’s curse is around 95 %. Truthful reporting, on the other hand, does not constitute a Nash equilibrium but it is ex post individually rational. Using a simulation study we demonstrate that truthful bidding may indeed represent some kind of focal point.

Keywords

Multi-attribute auctions Yardstick competition Articulation of preferences 

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Copyright information

© Springer Science+Business Media Dordrecht 2015

Authors and Affiliations

  • Jens Leth Hougaard
    • 1
  • Kurt Nielsen
    • 1
  • Athanasios Papakonstantinou
    • 2
  1. 1.Department of Food and Resource EconomicsUniversity of CopenhagenCopenhagenDenmark
  2. 2.Department of Electrical EngineeringTechnical University of DenmarkKgs. LyngbyDenmark

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