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.     

Repeated Auctions with Impatient Bidders and Externalities

This article studies collusion in repeated auctions both among patient and among impatient bidders when the outside option of the participation constraint is endogenous due to negative externalities. We find that (i) there are no bidding wars along the equilibrium path both for patient and for impatient bidders; compared to the optimal collusive bidding scheme for patient bidders, that for impatient bidders involves (ii) a lower threshold type above which bidding starts when externalities are small or (iii) more frequent jumps in a bidding scheme when externalities are large. The results carry an empirical implication that we should observe either a higher probability of sales or a higher number of bid levels in auctions that are repeatedly offered in unstable markets than those offered in stable markets.     

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.     

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.     

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.     

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.     

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。     

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.     

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。     

(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.     

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。     

Information Effects in Uniform Price Multi‐Unit Dutch Auctions

We design a multi‐unit descending‐price (Dutch) auction mechanism that has applications for resource allocation and pricing problems. We address specific auction design choices by theoretically and experimentally determining optimal information disclosure along two dimensions. Bidders are either informed of the number of bidders in the auction, or know that it is one of two possible sizes; they also either know the number of units remaining for sale or are unaware of how many units have been taken by other bidders. We find that revealing group size decreases bids, and therefore revenue, if units remaining are not shown. When group size is unknown the price also falls if the number of units remaining is revealed. The most efficient and largest revenue outcome occurs when bidders are not provided information on either group size or units remaining. These laboratory results conform to some directional predictions from our theory, although overbidding is common.     

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.

     

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.     

Rational Reserve Pricing in Sequential Auctions

A durable asset is sold in a sealed-bid first price auction. The seller sets an undisclosed reservation price. The seller has no prior information respecting the private valuations of the bidders. If no bid exceeds the reservation price, the asset is sequentially auctioned until it is sold. A rational seller will design an intertemporal series of reservation prices that maximize the discounted value of the transaction price. To accomplish this, the seller uses the history of unsuccessful bids to estimate the probability density functions governing the maximum bids at each hypothetical future auction date.     

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.     

Learning in Sequential Auctions

The importance of information transmission and learning is studied in a model of a sequential auction in which bidders have independent private values. In the course of the auction, information about the bidders' values becomes available as winning bids are revealed. From this, bidders learn about their opponents' types. A more subtle effect of information is that bidders anticipate the generation of information and take this into account in the first auction. The equilibrium in this model is contrasted to a scenario in which bidders are unaware of informational effects. It is shown that bidders who are aware of informational effects place lower bids on average and hence have higher payoffs. Properties of the equilibrium price path are studied. Regardless of the outcome of the first auction, the second price is expected to be equal to the first price. Despite this, the probability of a decreasing price sequence depends on the information generated in the first auction. Finally, it is shown that a simultaneous auction, in which informational effects are absent, yields the same expected final allocation as the equilibrium.     

城市土地出让中的问题与对策探讨

现代拍卖理论的研究表明,市场环境因素会对不同拍卖方式的效率产生影响。本文根据拍卖理论的一些研究成果,从受让人对土地估价的价值类型,招标拍卖中存在的“赢者诅咒”、“合谋”现象,以及事后土地交易合同的可执行性等方面,对不同的土地出让方式进行了比较分析。分析结果表明,在选择最有效率的开发商以及最大化收入等方面,市场环境因素对不同的交易方式产生不同的影响,因此,提高土地交易效率和效益,还必须进一步完善土地出让市场。     

Corporate entertainment expenses and corruption in public procurement

Viewing corporate entertainment of public officials as a form of bribes, Korea recently adopted a strong regulation against such practice (the Antigraft Act of 2016). In this paper, we investigate whether the regulation succeeded in reducing corruption in public procurement. An examination of the procurement system in Korea suggests that bribe-paying firms submit lower bids to procurement auctions than non-bribe-paying firms and that the difference in bid aggressiveness between bribe-paying and non-bribe-paying firms can be used as an indicator of the prevalence of corruption. Using the bidding data of firms participating in Korea Online E-Procurement System (KONEPS) auctions, we document that this indicator of corruption declined after the new regulation was adopted. We conclude that the new regulation reduced the entertainment-expense channel of corruption in public procurement.