Competition and Prices in USDA Commodity Procurement

We evaluate United States Department of Agriculture (USDA) food procurement auctions. The Department spends nearly $1 billion a year for products for domestic feeding programs, such as the National School Lunch Program, and another $2.5 billion for international food programs. USDA's purchasing relics primarily on auction mechanisms designed to induce “hard” manufacturer price competition. We compare private-sector prices to low bids in 25,000 auctions, and find that typical private-sector prices substantially exceed USDA low bids for comparable products. We also assess the effects of competition on low bids. Low bids fall as the number of bidders increases, and the effects are nonlinear. Additional bidders have a very small effect on prices when there are already five or six bidders, but a stronger effect in markets with only one or two bidders. Even in this highly transparent bidding environment, competition matters.     

Bidding off the wall in common value auctions

This paper examines the practice of phantom bidding in common value auctions with asymmetric information. Unlike in private value auctions it is very difficult to profit from phantom bidding even if the auctioneer observes the number of interested bidders. We find that the auctioneer is worse off submitting low bids or mixing between his participation strategies. Phantom bidding can generate higher revenues if a single bidder with a high value estimate is likely to be present at the auction. Systematic observation of an isolated high estimate requires negative correlation across bidders’ information that is atypical in a common value environment.     

Multiunit Auctions in Which Almost Every Bid Wins

We consider multiunit auctions in which there are enough units so that each bidder but one wins every unit on which he bids. We characterize the equilibrium bidding strategy for three different payment rules: the pay-your-bid auction, the uniform-price auction in which the price equals the lowest winning bid, and the uniform-price auction in which the price equals the highest losing bid. We also consider the Vickrey pricing rule. In the case we examine, the auctions are all efficient and thus are revenue equivalent. The equilibria illustrate several phenomona that cannot arise in single-unit auctions. Even though the auctions are expected-revenue equivalent, different bidders may end up paying very different amounts. Also, in contrast to single-unit auctions, changing the seller's reservation price affects revenues, even if it remains below the lowest possible value to bidders.     

Reservation Values and Regret in Laboratory First‐Price Auctions: Context and Bidding Behavior

Recent articles hypothesize that an asymmetry in regret motivates aggressive bidding in laboratory first‐price auctions. Subjects emphasize potential earnings foregone from being outbid. Proposed motivators of this asymmetry include the one‐to‐one relationship in the auction between winning and positive earnings and the ex post knowledge that bidders who do not win the auction know they earned less than the winning bidder. We design a novel implementation of the first‐price auction environment in which these characteristics are not present, while leaving unchanged the expected‐earnings maximizing bidding strategy against any fixed beliefs about the bidding behavior of others. Bidding is significantly less aggressive in this treatment. These findings support the hypothesis that aggressive bidding is motivated in part by features of the protocol for incentivizing subjects that are not essential to the auction environment.     

BAMs的均衡报价性质及其对合谋的激励

近年来报价平均方法（BAMs）在我国建筑业招投标中得到广泛应用,本文研究了报价平均方法的均衡报价行为及其对竞争者之间合谋的激励。本文证明报价平均方法会使竞标企业有激励互相抬高价格,报价脱离成本,造成市场资源配置无效率,促进企业合谋等更严重的问题。报价平均方法并非解决最低价中标制度产生的“过度压价”或“赢家诅咒”问题的好办法。     

Competition and collusion in a government procurement auction market

This paper tests the structure performance hypothesis by examining a highway construction industry in Florida. In the first-price sealed bid auction literature, there is little evidence on how many bidders are required for these markets to be competitive. Two different indicators are used to capture the transition from collusion to competition—a discontinuous effect of the number of bidders on winning bid price, and an associative effect of repeat bidding of a contractor with the same set of firms. The results suggest that winning bids decrease as the number of bidders rises until there are about six to eight firms. Since subsequent entry has no effect on the winning bid price, it is concluded that the highway construction market becomes competitive with about eight bidders.     

为何招标采购偏好“低于均价中标法”

低于均价中标法招标机制被广泛应用于各类招标采购中,但其合理性存在大量争议。文章首先在理论上证明了标准低于均价中标法下投标人不存在随真实成本严格递增的贝叶斯纳什均衡报价策略,然后基于某大型电力公司的招标采购数据,对投标行为进行实证分析,发现低于均价中标法下投标人报价可以反映其真实成本,且该机制在时间趋势上既可以激励投标人压缩利润,降低采购成本,又可以引导投标人形成稳定的低利润预期,指导投标人报"合理低价",防止"赢者诅咒"现象的发生。以上发现均说明低于均价中标法在业界被广泛应用的合理性,但这种招标机制也易于催生投标人间串谋。文章研究为低于均价中标法的合理使用提出了管理建议。     

(Anti-)Competitive effect of joint bidding: evidence from ODA procurement auctions

Using auction data on Japanese ODA procurement, I empirically examined whether joint bidding has a pro- or anti-competitive effect, particularly for local firms. In auction theory, the joint bidding effect depends on theories. If joint bidding reduces barriers to entry for potential bidders with limited financial and technical resources, it is pro-competitive. When bidders exploit collusive schemes under cover of joint bidding, the anti-competitive effect is realized. By the OLS and treatment effect models, I found that joint bidding in general does not foster competition, but it has a competitive effect on local firms in developing countries. J. Japanese Int. Economies 18 (3) (2004) 416–439.     

Allocating and taxing rights to state-owned minerals

Is Indonesia using the most effective possible strategies to derive revenue from its mineral resources? Auctions and work program bidding are the main ways of allocating mineral leases. In addition to the company taxes applied to all companies, governments can raise revenue from minerals owned by the state through auctions, royalties and rent taxes paid by private firms, and through dividends from state-owned firms. Indonesia uses work program bidding to allocate leases, and its production-sharing contracts are roughly equivalent to a rent tax at a high rate. This paper considers these options for raising revenues from mineral resources. It argues that efficiency and government revenue would both be increased if Indonesia relaxed direct controls on the operations of mining companies, and allocated leases by means of auctions, combined with a much lower rate of rent tax or, better still, a royalty.     

Going, Going, Gone! A Swift Tour of Auction Theory and its Applications

This paper provides a swift tour of auction theory and its applications. Among the questions it considers are: How much do bidders bid in commonly studied single-object auctions? How efficient are these auctions? How much revenue do they generate? Which single-object auction maximizes the seller’s expected revenue? What is the best way to auction incentive contracts? And, how efficient and complex are multi-object auctions?     

土地供应方式转变对房价的影响

中国城市土地供应方式经历了由无偿划拨到有偿出让,从协议出让到招拍挂出让的转变历程,当前招拍挂已经成为经营性用地的唯一出让方式。在地方政府"土地财政"的利益驱动下,土地单一垄断供应体制下的"招拍挂"土地出让方式已经成为影响房价上涨的重要因素之一。要遏制房价过快上涨的势头,应从根源上切断地方政府在房地产市场中的利益链条。     

Auctions with options to re-auction

A seller has one unit to sell using an English auction mechanism similar to internet auction markets, such as eBay. Bidders appear according to a random arrival process. The seller chooses a reserve price and duration for each auction. If the reserve is not met, the seller passes in the object and conducts another auction with a new, randomly chosen, set of bidders. We distinguish reserves that embody an institutional commitment not to sell below that price, from those that do not. In each case, we find the optimal reserve price and the optimal auction duration. Without price commitment, the equilibrium reserve is too low for allocative efficiency, whereas the optimal reserve with commitment is shown to be too high when the distribution of bidder valuations exhibits an increasing hazard rate. It might even be socially preferable to allow reserve price commitments. With respect to duration, a version of the Diamond paradox afflicts sellers who cannot commit to price; auctions facilitate valuable duration commitments that increase buyer competition and raise expected revenue. With commitment, price posting (equivalent to a zero-length auction) is the dominant selling mechanism.     

The Size of the Affiliation Effect

Abstract

The objective of this paper is to investigate whether the affiliation effect is of only marginal importance or it is of the same order of magnitude as the winner's curse and competition effects. This paper is an application of Pinkse and Tan in which they show that bids can be decreasing in the number of bidders in private value auctions provided that the bidders' private values are affiliated. They argue that the affiliation effect is also present in common value auctions. If the affiliation effect is substantial then a regression of bids on the number of bidders will not help in distinguishing between the common and private value paradigms. We use the Offshore Continental Shelf auction data-set to estimate these effects and find that the affiliation effect is smaller than the other two effects in terms of size. Therefore, at least in this application it appears unlikely that the affiliation effect would often offset the competition effect.     

Evaluating car license auction mechanisms: Theory and experimental evidence

In Singapore and many fast-growing cities of China, auctions are used to implement a quota system of car ownership. Three such cities where influential auction formats have been developed for allocating car licenses are the Asian metropolises of Singapore, Shanghai and Guangzhou, with other cities following suit. The current paper examines car auction formats both theoretically and experimentally, with the purpose of maximizing social welfare by improving efficiency and reducing misunderstandings. Reaction time is introduced as an essential non-economic factor of model bidding behaviors in these car license auctions. At the theoretical level, this paper finds that reaction time causes inefficient allocations in the Shanghai auction, but not in the Singapore or Guangzhou auctions. The experimental results are consistent with the theoretical prediction that late bids prevail in all of these auction formats, but only lead to inefficient allocations in the Shanghai auction. Additionally, the subjects' reaction time in the Shanghai treatment was scored by conducting a number comparison task, finding a positive correlation between the probability of winning and the reaction time score.     

Risk Aversion and the Winner's Curse

This article analyzes an auction in which bidders see independent components of a common prize value. The Nash equilibrium for two rational bidders is shown to be independent of risk attitudes. The information structure allows explicit calculation of an alternative equilibrium in which naive bidders do not correctly discount the value of the prize, contingent on winning, and thus they suffer the winner's curse. Subjects in a laboratory experiment clearly fall prey to the winner's curse; the data conform most closely to the predictions of the naive model. Moreover, the level of risk aversion implied by fitting the naive model is similar to an independent risk aversion measure obtained in a separate (private value) bidding exercise.     

Specialization and Welfare in the Presence of Imperfectly Integrated Capital Markets and Learning-by-doing

We study a two-sector, two-period model with learning externalities in the modern sector and imperfectly integrated capital markets. We find that higher capital market integration lowers the requirements on the learning pattern necessary for free trade to lead to an equilibrium with maximal specialization in modern sector activities. We further find that the equilibrium with maximal specialization in modern sector activities Pareto dominates, if it exists, any other free trade equilibrium, and that autarky can Pareto dominate free trade if capital markets are poorly integrated, even when there is maximal specialization in modern sector activities under free trade.

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Selective Entry in Highway Procurement Auctions

When participating in an auction is costly, a potential bidder has to decide whether to enter the auction or not. The extent to which the potential bidders know their private cost before making their entry decisions determines how selective the entry process is. Endogenous selective entry is common in many auctions and it has important implications for designing auctions, in particular, choosing the bid discount policy that is frequently used in public procurements to achieve distributional goals of the government. Prior empirical studies of the bid preferences were based on frameworks that either did not explicitly model endogenous participation or assumed endogenous, but non-selective participation. This study empirically investigated whether the entry process is selective in the highway procurement auctions run by the California Department of Transportation. To this end, the asymmetric affiliated-signal model was adapted to permit endogenous selective entry. Model parameters, including entry costs and distributions of construction costs for regular and fringe companies, were estimated nonparametrically. The results show evidence favoring selective entry of the fringe firms and imply that the level of bid discount required to achieve the procurement buyer’s policy objective may be lower than what is previously found in the literature under the assumption of non-selective entry.

     

Coordination failure in an industrial society

Summary Different macroeconomic theories of coordination failure are dealt with. Using simple models it is shown that externalities may lead to multiple Pareto-ranked equilibria or, under suitable assumptions, to a continuum of equilibria. It is argued that in industrial societies imperfect competition is predominant. Therefore, demand externalities may be the main cause of low level equilibria. Trading externalities and searching externalities may play a supplementary role. The theory of coordination failure is based on complete markets and price flexibility. Despite its strong appeal, it has certain shortcomings which are also discussed in the paper.I would like to thank S.K. Kuipers and A. van Schaik for their useful comments on an earlier version of this paper.     

Increasing Diversity in Telecommunications Ownership and Increasing Efficiency in Spectrum Auctions by Breaking the Link Between Capital Market Discrimination and FCC Spectrum Auction Outcomes

In Section 309(j)4(D) of the Communications Act, the Federal Communications Commission (“FCC”) is required to increase opportunities for minority groups to participate in the provision of spectrum based services. In Adarand Construction, Inc. v. Pena, the Supreme Court held that race-based government programs were subject to strict scrutiny. That is race-based programs must serve a compelling governmental interest such as remedying past discrimination, and must be narrowly tailored to serve that interest. Against this backdrop, a simple theoretical model is developed that explains the relationship between capital market discrimination and outcomes in FCC spectrum auctions. Given capital market discrimination and all other factors being equal, it is shown that a minority firm has zero probability of winning in an auction for spectrum. In addition, it is proven that, if equal bidding credits are given to all firms, if there is capital market discrimination, and if all other things are equal, the minority firm has a zero probability of winning in a spectrum auction. It is shown that a policy of auctioning spectrum, when there is capital market discrimination, is an inferior policy among policies that can be used to allocate spectrum. Finally, a policy of auctioning spectrum, when there is capital market discrimination, results in an inefficient auction. These theoretical results and the empirical literature on capital market discrimination suggest that the FCC is implicitly discriminating against minorities through its auctioning of spectrum under conditions of discrimination in capital markets. The results imply that race-based programs are necessary/justified in order to increase diversity in telecommunications ownership and increase the efficiency of FCC Spectrum Auctions. Given possible legal remedies, the paper contains a critical “audit”/analysis of the FCC’s lending practices under the FCC’s installment payments. Legislative proposals for creating some new form of credit/installment payment in conjunction with some experienced financial institution(s) are summarized and reviewed.     

基于双边市场理论的互联网定价模式与反垄断问题研究

文章首先厘清中国电信业的双边市场特征,然后通过构建双边市场模型分析了垄断平台和竞争性平台的均衡价格,同时考虑了不同收费形式下中国电信业的定价策略,最后分析了其双边市场中反垄断政策的含义.研究主要结论是:双边市场定价通常对需求价格弹性较小一边的价格加成比较高;网络外部性越强,价格结构越不对称;价格结构与用户数量或平台交易量是动态相互影响;差异化程度越大,平台对用户的价格加成越大.这对于我国“三网融合”的背景下电信产业市场结构、定价策略和反垄断问题具有一定的借鉴意义.