Optimal sequential auctions |
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| Institution: | 1. Department of Economics, City University London, London EC1V 0HB, UK;2. Department of Economics, London School of Economics, London WC2A 2AE, UK;1. Department of Nephrology & Rheumatology, Shanghai Tenth People''s Hospital, Tongji University School of Medicine, Shanghai, China;2. Department of Biomedical Engineering, University of Houston, 3605 Cullen Blvd, Room 2018, Houston, TX 77204, USA;1. Shanghai University of Finance and Economics, School of Economics, Guoding Road 777, Shanghai 200433, China;2. Korea University, Department of Economics, Sungbuk-gu Anam-ro 145, Seoul 136-701, Republic of Korea;3. Institute of Economic Theory I, Humboldt University at Berlin, Spandauer Str. 1, 10178 Berlin, Germany |
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| Abstract: | Sequential sealed first-price and open descending-price procurement auctions are studied. We examine which procurement auction rule achieves the low procurement cost. We show that the answer to this policy question depends on whether the items are complements or substitutes. With substitutes, the first-price procurement auction is preferred, while with complements, the open descending-price procurement auction is preferred. We also illustrate the procurement cost minimizing auction and the auction rule preferred by the bidders. With substitutes, bidders prefer the open descending-price procurement auction, while with complements bidders prefer the first-price procurement auction. |
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