Collusive Market Sharing and Corruption in Procurement

This paper investigates links between corruption and collusion in procurement. A first-price multiple-object auction is administered by an agent who has legal discretion to allow for a readjustment of (all) submitted offers before the official opening. The agent may be corrupt, that is, willing to "sell" his decision in exchange for a bribe. Our main result shows that the corrupt agent's incentives to extract rents are closely linked with that of a cartel of bidders. First, collusive bidding conveys value to the agent's decision power. Second, self-interested abuse of discretion to extract rents (corruption) provides a mechanism to enforce collusion. A second result is that package bidding can facilitate collusion. We also find that with corruption, collusion is more likely in auctions where firms are small relative to the market. Our main message to auction designers, competition authorities and criminal courts is that risks of collusion and of corruption must be addressed simultaneously. Some other policy implications for the design of tender procedures are discussed.     

Second-Price Auctions with Asymmetric Payoffs: An Experimental Investigation

A series of two-player, second-price common-value auctions are reported. In symmetric auctions, bidders suffer from a winner's curse. In asymmetric auctions in which one bidder has a private value advantage, the effect on bids and prices is proportional rather than explosive (the prediction of Nash equilibrium bidding theory). Although advantaged bidders are close to making best responses to disadvantaged bidders, the latter bid much more aggressively than in equilibrium, thereby earning negative average profits. Experienced bidders consistently bid closer to the Nash equilibrium than inexperienced bidders, although these adjustments towards equilibrium are small and at times uneven.     

On the lowest-winning-bid and the highest-losing-bid auctions

Theoretical models of multi-unit, uniform-price auctions assume that the price is given by the highest losing bid. In practice, however, the price is usually given by the lowest winning bid. We derive the equilibrium bidding function of the lowest-winning-bid auction when there are k objects for sale and n bidders with unit demand, and prove that it converges to the bidding function of the highest-losing-bid auction if and only if the number of losers n−k gets large. When the number of losers grows large, the bidding functions converge at a linear rate and the prices in the two auctions converge in probability to the expected value of an object to the marginal winner.     

Preference for bid time in hybrid auctioned IPOs: Evidence from China

Using comprehensive bidding data of 783 Chinese IPOs from June 2009 to November 2012, we investigate institutions’ preference for bid time in hybrid auctions. We find that (1) earlier bids are associated with higher pricing errors, which is more pronounced in IPOs with greater uncertainty; (2) the bid prices of earlier bids tend to be aggressively high; (3) earlier bids are associated with fewer bid shares and allocations; (4) bidders submitting earlier bids (hereafter, earlier bidders) have inferior profits; and (5) earlier bidders show persistence in bid time. Overall, the empirical results remain robust after controlling for unobserved bidder-underwriter relationships and indicate that earlier bidders tend to be less informed. Our findings reveal and highlight the effect of bid time on identifying informative bids in hybrid auctions.     

Using announcement options in the bid construction phase for disaster relief procurement

This paper presents an analysis of the bid construction phase of procurement auctions in disaster relief and humanitarian logistics. Substitution and partial fulfillment options are presented in formulations to allow bidders with fewer inventories to offer substitute item types and partial bids in auctions. During the auction announcement phase, a coordinating platform for disaster locations (i.e., auctioneer) allows substitution and partial fulfillment options to the relief suppliers (i.e., bidders) when acceptable. Thus, suppliers with fewer inventories can offer substitute item types and participate in more auctions by partially bidding. A genetic algorithm, a simulated annealing algorithm and an integer program are used for the analysis of the bid construction phase with different announcement options. Heuristic solution techniques and an IP formulation help understand the dynamics of the bid construction problem. It is shown that the addition of substitution and partial fulfillment options is essential to diversify and increase the usable capacity of the supplier base. Additionally, the partial fulfillment option enables better usage of supplier inventories in an environment with scarce supplies.     

工程招标应注意的十个问题及其对策

结合我国工程建设市场的实际,剖析工程招标应注意潜在投标人的资格预审,投标人的有效竞争,投标人的关联程度,评标前的源地评审,鉴别投标文件的可信度,内部腐败,识别以低于成本的价格投标的投标人,选择适合工程的采购方式,关键路径工程的招标和投标人的项目管理模式等十个问题,并提出相应的防范对策。     

Asymmetry in first‐price auctions with affiliated private values

Collusion and heterogeneity across firms may introduce asymmetry in bidding games. A major difficulty in asymmetric auctions is that the Bayesian Nash equilibrium strategies are solutions of an intractable system of differential equations. We propose a simple method for estimating asymmetric first‐price auctions with affiliated private values. Considering two types of bidders, we show that these differential equations can be rewritten using the observed bid distribution. We establish the identification of the model, characterize its theoretical restrictions, and propose a two‐step non‐parametric estimation procedure for estimating the private value distributions. An empirical analysis of joint bidding in OCS auctions is provided. Copyright © 2003 John Wiley & Sons, Ltd.     

Auctions with endogenous participation

We study endogenous-participation auctions where bidders only know the number of potential participants. After seeing their values for the object, potential participants decide whether or not to enter the auction. They may not want to enter the auction since they have to pay participation costs. We characterize equilibrium bidding strategies and entry decisions for both first- and second-price sealed-bid auctions when participation is endogenous. We show that there is a pure strategy entry equilibrium where only bidders with values greater than a certain cut-off point actually bid. In this context, both types of auctions generate the same expected revenue. We also show that, contrary to the predictions of the fixed number of bidders literature, the seller's expected revenue may decrease when the number of potential participants increases. In addition, we show that it is optimal for the seller to charge an entry fee, which contrasts with results from the existing literature on auctions with entry. As in the fixed-n literature, we show that first-price auctions generate more expected revenue than second-price auctions when buyers are risk-averse. Finally, we characterize the optimal auction – the auction that maximizes the seller's expected revenue – by using a direct revelation mechanism. The optimal auction involves a reserve price larger than the optimal reserve price in the fixed-n literature. The winner's payment is the second highest bid less the participation cost and losers receive a subsidy equal to the participation cost. Received: 17 August 1998 / 21 September 1999     

在线拍卖中的代理研究综述

在线拍卖站点的不断增加给在线竞买人提出了具大的挑战,竞买人需要从大量的拍卖站点中选择一个恰当的拍卖站点,以保证在满足他们偏好的前提下得到他们希望的物品。不同的拍卖站点采用的拍卖方式和竞价策略是不同的,因此,不同的拍卖站点其竞价代理的设计策略也不同。本文主要对目前在线拍卖代理研究进行综述。     

Synergies in Wireless Telephony: Evidence from the Broadband PCS Auctions

We examine bid data from the first two broadband PCS spectrum auctions for evidence of value synergies. First, we estimate a benchmark regression for the determinants of final auction prices. Then, we include variables reflecting the extent to which bidders ultimately won or already owned the adjacent wireless properties. Consistent with geographic synergies in an ascending-bid auction, prices were higher when the highest losing bidder had adjacent licenses. The footprints of winning bidders suggest that they were often successful in realizing these synergies.     

Preemptive bidding in takeover auctions with affiliated values

This paper extends Fishman's (1988) model of preemptive bidding in takeover auctions to auctions with affiliated values. It shows that preemptive bidding transfers wealth from the seller to the first bidder without affecting the profit of the second bidder and social welfare. It also shows that higher correlation between bidders’ values leads to higher preemption rates but has an ambiguous effect on the size of the opening bid. Finally, it shows that in auctions with affiliated values, even infinitesimal entry costs may lead to a preemptive jump bidding that allows the reallocation of the entire surplus from the seller to the first bidder.     

Bids as a Vehicle of (Mis)Information: Collusion in English Auctions with Affiliated Values

In an English auction, a bidder’s strategy depends on the prices at which his competitors drop out, because these convey information on the value of the object on sale. A ring of colluding bidders can strategically manipulate the information transmitted through its members’ bids, in order to mislead other bidders into bidding less aggressively and thus allow a designated bidder to bid more aggressively. Collusion increases the probability that the ring wins the auction and reduces the price it pays. The presence of a ring harms other bidders (as well as the seller) and reduces efficiency.     

Bundling and the Reduction of the Winner's Curse

The paper studies the effects of bundling on the bidding strategies and seller revenues in auctions when the bidders have common values for the objects. Bundling of objects before the auction reduces the problem of the winner's curse, and the bidders bid more aggressively. This does not mean that a bundled auction is always better for the seller's revenue. Indeed, there is another effect that makes the bundled auction preferable (from the seller's standpoint) if and only if the number of bidders is small. While this is the only effect present in an independent-private-values model, it does not vanish when bidders have pure common values for the objects. The paper concludes that a bundled auction is unambiguously better for the seller than separate auctions when the number of bidders is small.     

Anticipation of Auction Fever: Entry Decision,Reserve Price and the Choice of Auction Design

This paper analyzes the entry decision of rational bidders who expect to experience auction fever in English auctions. It shows that nonparticipation decision reduces seller's expected profit and this effect may outweigh the positive effect of the auction fever. We analyze the choice between English and second‐price sealed‐bid auctions and the optimal reserve price in English auctions. We show that it might be optimal for the seller to set a reserve price below her own valuation of the object. Finally, we show that the order in which bidders place their bids matters and the first bidder always has an advantage. Copyright © 2011 John Wiley & Sons, Ltd.     

Electronic reverse auction configuration and its impact on buyer price and supplier perceptions of opportunism: A laboratory experiment

Buying organizations are increasingly using electronic reverse auctions (eRAs) to source from suppliers. However, recent quasi-experimental and field research has suggested that the use of this sourcing technique can create perceptions of opportunism among participating suppliers. Yet from the buyer's perspective, online reverse auctions can yield lower purchase prices. Given the many ways in which to configure on-line auctions, we extend existing research by using a laboratory experiment to investigate how different reverse auction configurations jointly influence bid price and suppliers’ perceptions of buyer opportunism.Our findings suggest that supplier bid prices decrease over time as they participate in more eRAs, regardless of the configuration of auction parameters. However, the combination of rank (versus price) visibility, high (versus low) supplier need to win a contract, and six (versus three) competitors was significantly more effective than other combinations of variables in immediately reducing bid prices. The data also indicated that when suppliers’ bids dropped substantially across auctions, their perceptions of opportunism increased. Notably, auction parameter combinations such as price visibility, three competitors, and low need for the contract yielded comparably low bids by the third auction, without any increases in perceived buyer opportunism.     

Can preemptive bidding in takeover auctions be socially optimal? Yes it can

This paper analyzes a model of preemptive jump bidding in private value takeover auctions with entry costs. It shows that when the second bidder owns a fraction of the target firm preemptive jump bidding leads to a higher social surplus, improves the expected profit of both bidders and reduces the expected final price. Such a toehold also leads to higher jump bids. The model implies that preemptive bidding hurts the minority shareholders but benefits the large shareholder of the target firm.     

建筑工程投标报价及其最低成本价的判定

面对入世的新形势，中国的建筑行业将对国际开放，为了提高我国建筑企业的竞争能力，从建筑市场价格竞争的角度，通过对建筑工程招投标，投标报价，特别对工程清单报价的分析，浅议了企业最低成本价判定方法，力图推进合理低标价中标的进程。     

Econometric Analysisof Collusive Behaviorin a Soft-Drink Market

This paper proposes an empirical methodology for studying various (implicit or explicit) collusive behaviors on two strategic variables, which are price and advertising, in a differentiated market dominated by a duopoly. In addition to Nash or Stackelberg behaviors, we consider collusion on both variables, collusion on one variable and competition on the other, etc. Using data on the Coca-Cola and Pepsi-Cola markets from 1968 to 1986, full information maximum likelihood estimation of cost and demand functions are obtained allowing for various collusive behaviors. The collusive hypothesis is not rejected, and the best form of collusive behavior is selected via nonnested testing procedures. Using the best model, Lerner indices are computed for both duopolists to provide summary measures of market power. Finally, our approach is contrasted with the conjectural variation approach and is shown to give superior results.     

An empirical model of the multi‐unit,sequential, clock auction

We construct a model of participation and bidding at multi‐unit, sequential, clock auctions when bidders have multi‐unit demand. We describe conditions sufficient to characterize a symmetric, perfect‐Bayesian equilibrium and then demonstrate that this equilibrium induces an efficient allocation. We propose an algorithm, based on the generalized Vickrey auction, to calculate the expected winning bid for each unit sold. This algorithm allows us to construct a simulation‐based estimator of the parameters for both the participation process and the distribution of latent valuations. We apply our method to data from 37 multi‐lot, sequential, English auctions of export permits for timber held in Russia. Copyright © 2006 John Wiley & Sons, Ltd.