Bid-Rigging in Auctions for Korean Public-Works Contracts and Potential Damage

This research is an empirical study to find solid statistical evidence of collusion inauction for construction contracts and to gauge the possible effects of bid-rigging onauction prices in Korea. Using limited information contained in sketch bid data, weshow that local construction firms enjoy statistically significant incumbency premiumsin their incumbent sites. Thus, it is inferred that contractors engage in complementarybidding, in which all bidders, except one, submit high bids so as to lose. The statisticalevidence of the incumbency effect is also confirmed in long-running civil engineeringconstruction contracts, which are carried out over several years. Utilizing the transitionfrom a cooperative to non-cooperative regime, we also estimate the potential damage ofstructural bid rigging in public-works contracts by year, contractor and construction type. The estimated overcharge ratio based on a forecasting approach is 15.5% of the total expenditures from January 1995 to June 1998. We also present potential damage estimates by the firm. The estimated overcharge by contractor offers a guideline for the proper allocation of the total overcharges to construction contractors in case contractors are charged with bid-rigging and found guilty.     

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

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.     

Auctions for universal service obligations

This paper proposes the use of auctions for determining which carriers should undertake a universal service obligation, and what compensation they should receive for performing this function. From the regulator's perspective the auction would reveal carriers’ valuations of the USO, determine the number of USO providers endogenously, and provide an alternative to traditional cost-of-service regulation. Since bidding is a voluntary action by the firms, auctions would serve also to discipline the regulator. While auctions are compatible with competitive local service markets, they can also serve as a transition to competitive markets.     

Lowest-Unmatched Price Auctions

Lowest-Unmatched Price Auctions (LUPAs) specify that the lowest bid placed by only one participant wins. They are used in internet trading and TV and radio shows. We model LUPAs as games with minimal restrictions, in particular allowing players to place more than one bid, since multiple bids have been observed in most actual LUPAs. Though LUPAs are games for which a closed-form solution does not seem to exist in general, our model generates several testable implications about the type of strategies played in equilibrium and the highest bid in a given LUPA. Our analysis suggests that players follow strategic considerations and arrive at decisions which, at least in the aggregate, are generally consistent with theoretical predictions, yet there are some remarkable deviations.     

Auctions in financial markets

In this article I discuss how auctions and tools developed for their empirical analysis can inform empirical analysis of financial markets. Since virtually all markets organized as auctions have well-specified and known rules that map nicely into game-theoretical models, I demonstrate using several applications that one can often leverage particular details to study issues that have nothing to do with the auction per se. To do so, I first review an estimation method, which is widely applicable in many settings where a researcher needs to recover agents’ beliefs, in order to establish a link between observables and unobservables using some version of a necessary condition for optimality. I then discuss applications to quantification of front-running, evaluation of quantitative easing operations and estimation of a demand system for financial products.     

Reserve Prices in Repeated Auctions

This paper aims to estimate the effect of imposing a reserve price in repeated auctions of homogeneous items. I model the behavior of impatient bidders who search for the best auction outcome over time. The model is used to develop estimating equations for the bidders’ valuations, and to evaluate the effect of reserve prices on bids and revenue. Using data collected from surplus auctions of personal computer processors, I find economically significant gains from imposing a reserve price. The revenue-maximizing reserve price improves revenue by about 23% for a large subsample of the auctions in the data.     

产品分成合同模式和回购合同模式比较分析

在国际油气勘探开发合作项目中，资源国与承包商之间的合作方式主要有租让制和合同制，合同制包括产品分成合同（PSC）、服务合同（Service)和回购合同（Buy Back)等几种，其中油气产品分成合同模式较为普遍，新兴的回购合同模式在中东一些国家得到应用。产品分成合同与回购合同在核心内容、追求目标和风险方面存在不同，资源国政府与承包商选择合同模式的着眼点不同，构成了对合同模式的主要争议。油气田勘探开发项目，涉及长期、大宗的投资，分析回购合同模式和产品分成合同模式的适用性和各自的特点，对于从事国际油气合作项目，追求投资回报的最大化，具有一定的指导意义。     

Auctions with bid credits and resale

Bid credits favoring subsets of bidders are routinely imposed on auctions and procurement auctions. These bid credits result in inefficient auction outcomes, which create pressure for post-auction resale or, in a procurement context, for subcontracting. We show that the presence of resale, in turn, affects bidding strategies in such a way that auction outcomes are more likely to be inefficient and less informative, making it harder for resale to correct inefficiencies. The negative effects of bid credits and resale can be mitigated through direct restrictions on resale, tight caps on credits, reserve prices, anonymous bidding, and enhanced competition.     

施工合同激励条款分析与设计建议

有效的激励措施能提高工程建设效率,而合同是激励措施落实的重要手段,因此必须设计准确、合理、完备的激励条款.通过对我国建设工程施工合同示范文本、FIDIC施工合同条件的激励条款进行分析,提出激励条款设计建议.     

All–Pay Auctions with Variable Rewards

We study all–pay auctions with variable rewards under incomplete information. In standard models, a reward depends on a bidder's privately known type; however, in our model it is also a function of his bid. We show that in such models there is a potential for paradoxical behavior where a reduction in the rewards or an increase in costs may increase the expected sum of bids or alternatively the expected highest bid.     

Assessing the Performance of Real Estate Auctions

This article investigates the performance of real estate auctions relative to negotiated sales. It uses a repeat-sales methodology to control for unobserved differences in the quality of auction properties. Properties auctioned in Los Angeles during the 1980s boom sold at an estimated discount of 0%–9%, while sales in Dallas following the oil bust obtained discounts of 9%–21%. This evidence is consistent with the theoretical prediction that the auction discount increases in downturns when a seller trades-off a longer expected selling time in a search market against an immediate auction sale. The study finds no evidence of the declining price anomaly.     

Auctions with quantity externalities and endogenous supply

This paper studies the design of license auctions when the number of licenses allocated in the auction determines structure of the post-auction market. I first show that a sequence of conditional reserve prices that specify minimum acceptable bid at each supply level can be used to determine supply endogenously. Then I construct a static auction called multi-dimensional uniform-price auction and a dynamic auction called Walrasian clock auction that allow the auctioneer to condition reserve price on supply and allow bidders to condition bids on supply. I show that both proposed auctions can implement the efficient market structure that maximizes total surplus in the post-auction market in a dominant strategy equilibrium. I next characterize the optimal auction and show that the two proposed auctions can yield the optimal revenue under a sequence of optimal reserve prices.     

Public Procurement Auctions and Competition in Turkey

This paper empirically investigates the effect of the competitive environment (number of participants) on the cost of procurement. We use a unique dataset provided by the Public Procurement Authority (PPA) of Turkey that covers all of the government procurement auctions for the years 2004–2006. First, after controlling for possible endogeneity, we show that the number of bidders significantly and negatively affects the procurement price. Thus, the existence of a more competitive environment significantly decreases procurement costs in Turkey. Second, when auctions are open to foreign participation, the auction price tends to be lower. Finally, prices in services and goods sectors are more sensitive to changes in the number of bidders than is true for the construction sector. The results of this paper have several policy implications for e-procurement and efficient procurement design.     

Bid Roundness Under Collusion in Japanese Procurement Auctions

We analyze the “roundness level” of bids—defined as the number of zeros at the end of the bid—in public procurement auctions for construction works in Okinawa Prefecture, Japan, where a bid-rigging case was filed. We hypothesize that bid rigging increases the roundness of bids through the bid coordination process. Specifically, winners choose round numbers to avoid any miscommunication when they announce their planned bids to other ring members, and losers prefer round numbers when they arbitrarily bid above the winning bid. We find that (1) there is a positive relationship between the roundness of a bid and its relative value as a fraction of the reserve price, (2) the roundness of bids is higher when collusion is active than when it is inactive, (3) among the ring bids, the roundness of the lowest bids is even higher than that of the other bids, and (4) bids by non-ring members are also round when collusion is active.     

Pensions as Psychological Contracts: Implications for Work Outcomes

Drawing on psychological contract theory, we develop predictions regarding the moderating influence of the meaning employees assign to their marginal quit costs, as well as on the role of stayer perceptions and saver effects, on various work outcomes under a defined-benefit pension. Results show pension incentives can have favorable or unfavorable effects depending on whether employees perceive them as supportive relational contracts or as low-trust transactional contracts. Implications for research and policy are discussed.     

On Strategic Quantity Bidding in Multiple Unit Auctions

Standard studies of multiple unit auctions generally overlook the strategic role of bidders' quantity decisions. Using a simple equilibrium model of bidding I analyze bidders' incentives to choose quantities in discriminatory and competitive auctions. The main result is that bidders have a stronger strategic incentive to bid for fewer units in competitive auctions. Since under competition a bidder pays the lowest accepted price for each unit she gets, she may benefit from dropping her quantity to let lower-valuing bidders enter the set of winners. This prediction is consistent with empirical observations from foreign currency and spectrum auctions.     

Innovation in Labor Contracts: On the Adoption of Profit Sharing inCanadian Labor Contracts

I present a model in which I show that labor contracts with wages indexed to prices have longer optimal contract lengths and therefore are more likely to adopt performance-related pay. There is empirical support for these predictions in Canadian collective-bargaining agreements. Contract durations are longer in indexed contracts. Performance-related pay is more than twice as likely to be adopted and present in indexed contracts and more likely to be adopted in contracts with longer durations.     

Buyer Alliances as Countervailing Power in WIC Infant-Formula Auctions

State agencies in infant-formula procurement auctions receive lower bids when they are in buyer alliances than when they are unallied. The Special Supplemental Nutrition Program for Women, Infants, and Children (WIC) uses an auction to procure infant formula. Manufacturers bid on the right to be an agency’s sole supplier by offering a rebate on formula sold through WIC. Agencies frequently join together in buyer alliances. An empirical estimation shows that bids are lower to alliances and that lower prices result because alliances are heterogeneous. Results suggest that when heterogeneity is not controlled, bids decline with alliance size, which has policy implications because Congress recently limited alliance size.