Advertisement

Review of Industrial Organization

, Volume 42, Issue 3, pp 321–343 | Cite as

The Impact of Timing on Bidding Behavior in Procurement Auctions of Contracts with Private Costs

  • Dakshina G. De Silva
  • Georgia KosmopoulouEmail author
  • Beatrice Pagel
  • Ronald Peeters
Article

Abstract

We provide a comparison of bidding behavior between multi-round and single-round auctions considering bid lettings for asphalt construction contracts that are known to have primarily private costs. Using a reduced-form difference-in-difference approach as well as the nonparametric estimation technique that was proposed by Racine and Li (J Econom 119(1):99–130, 2004) we find that bidding is more aggressive in a sequential multi-round setting than in a simultaneous single-round format. We explore potential causes for the bidding difference across formats that are related to synergies and the level of bidder participation.

Keywords

Multi-unit auctions Procurement auctions 

JEL Classification

D44 H57 

Preview

Unable to display preview. Download preview PDF.

Unable to display preview. Download preview PDF.

References

  1. Albano G., Germano F., Lovo S. (2001) A comparison of standard multi-unit auction with synergies. Economics Letters 71(1): 55–60CrossRefGoogle Scholar
  2. Bajari P., Ye L. (2003) Deciding between competition and collusion. Review of Economics and Statistics 85(4): 971–989CrossRefGoogle Scholar
  3. Bertrand M., Duflo E., Mullainathan S. (2004) How much should we trust differences-in-differences estimates?. The Quarterly Journal of Economics 119(1): 249–275CrossRefGoogle Scholar
  4. Deltas G., Jeitschko T. (2007) Auction hosting site pricing and market equilibrium with endogenous bidder and seller participation. International Journal of Industrial Organization 25(6): 1190–1212CrossRefGoogle Scholar
  5. De Silva D. G., Dunne T., Kankanamge A., Kosmopoulou G. (2008) The impact of public information on bidding in highway procurement auctions. European Economic Review 52(1): 150–181CrossRefGoogle Scholar
  6. De Silva D. G., Dunne T., Kosmopoulou G. (2002) Sequential bidding in road construction auctions. Economics Letters 76(2): 239–244CrossRefGoogle Scholar
  7. De Silva D. G., Jeitschko T., Kosmopoulou G. (2005) Stochastic synergies in sequential auctions. International Journal of Industrial Organization 23(3–4): 183–201CrossRefGoogle Scholar
  8. De Silva D. G., Kankanamge A., Kosmopoulou G. (2007) A change in timing of auctions with synergies and its impact on bidding behavior. Economics Letters 95(1): 60–65CrossRefGoogle Scholar
  9. Feng J., Chatterjee K. (2010) Simultaneous vs. sequential sales: Bidder competition and supply uncertainty. Decision Support Systems 49(3): 251–260CrossRefGoogle Scholar
  10. Goeree J., Offerman T. (2003) Competitive bidding in auctions with private and common values. Economic Journal 113(489): 598–613CrossRefGoogle Scholar
  11. Haile, P., Hong, H., & Shum, M. (2006). Nonparametric tests for common values in first-price sealed-bid auctions. Working paper.Google Scholar
  12. Hausch D. (1986) Multi-objects auctions: Sequential vs. simultaneous sales. Management Science 32(12): 1599–1610CrossRefGoogle Scholar
  13. Jofre-Bonet M., Pesendorfer M. (2003) Estimation of a dynamic auction game. Econometrica 71(5): 1443–1489CrossRefGoogle Scholar
  14. Koenker R., Bassett G. Jr. (1982) Robust tests for heteroscedasticity based on regression quantiles. Econometrica 50(1): 43–61CrossRefGoogle Scholar
  15. Krishna V., Rosenthal R. (1996) Simultaneous auctions with synergies. Games and Economic Behavior 17(1): 1–31CrossRefGoogle Scholar
  16. Levin D., Smith J. (1994) Equilibrium in auctions with entry. American Economic Review 84(3): 85–599Google Scholar
  17. Li T., Zheng X. (2009) Entry and competition effects in first-price auctions: Theory and evidence from procurement auctions. Review of Economic Studies 76(4): 1397–1429CrossRefGoogle Scholar
  18. Marmer, V., Shneyerov, A., & Xu, P. (2007). What model for entry in first-price auctions? A nonparametric approach. Working paper, University of British Columbia and Concordia University.Google Scholar
  19. Milgrom P., Weber R. (1982) A theory of auctions and competitive bidding. Econometrica 50(5): 1089–1122CrossRefGoogle Scholar
  20. Milgrom P., Weber R. (2000) A theory of auctions and competitive bidding, II. In: Klemperer P. (Ed.) The economic theory of auctions, Vol. 1. Edward Elgar, Cambridge, pp 179–194Google Scholar
  21. Moulton B. (1990) An illustration of a pitfall in estimating the effects of aggregate variables on micro units. Review of Economics and Statistics 72(2): 334–338CrossRefGoogle Scholar
  22. Palfrey T., Pevnitskaya S. (2008) Endogenous entry equilibrium in first price private value auctions: An experimental study. Journal of Economic Behavior and Organization 66(3–4): 731–747CrossRefGoogle Scholar
  23. Porter R., Zona J. (1993) Detection of bid rigging in procurement auctions. Journal of Political Economy 101(3): 518–538CrossRefGoogle Scholar
  24. Racine J., Li Q. (2004) Nonparametric estimation of regression functions with both categorical and continuous data. Journal of Econometrics 119(1): 99–130CrossRefGoogle Scholar
  25. Samuelson W. (1985) Competitive bidding with entry costs. Economics Letters 17(1–2): 53–57CrossRefGoogle Scholar

Copyright information

© Springer Science+Business Media, LLC. 2012

Authors and Affiliations

  • Dakshina G. De Silva
    • 1
  • Georgia Kosmopoulou
    • 2
    Email author
  • Beatrice Pagel
    • 3
  • Ronald Peeters
    • 4
  1. 1.Department of EconomicsLancaster UniversityLancasterUK
  2. 2.Department of EconomicsUniversity of OklahomaNormanUSA
  3. 3.Düsseldorf Institute for Competition Economics (DICE)DüsseldorfGermany
  4. 4.Department of EconomicsMaastricht UniversityMaastrichtThe Netherlands

Personalised recommendations