Auction Events Research Articles

How auctioneers set reserve prices in procurement auctions

We introduce a behavioral model that effectively predicts auctioneers’ reserve choice patterns in English clock auctions across varying reserve price formats (whether reserve prices are set ex-ante or ex-post auction events), number of bidders and the distribution of suppliers’ costs. In a two-parameter model, which we call Subjective Conditional Probability (SCP), auctioneers have subjective judgement of conditional probabilities. We theoretically show that the SCP explains two intuitive, but sub-optimal, reserve price setting patterns. It predicts and provides rationalizations for ex-ante reserve prices that decrease in the number of bidders and ex-post reserve prices that increase in the realized auction price. We conduct two experiments; one with a uniform cost distribution and another with a left-skewed cost distribution. We validate the SCP model internally and externally by comparing it to a wide range of models, including reduced form linear regression, risk aversion, anticipated regret model, and subjective probability judgement via in-sample and out-of-sample predictions. We conclude that the SCP has strong external validity across a variety of procurement environments.

Making companions: Companionability and encounter value in the marketization of the American Mustang

In recent years, attempts have been made to establish a market for American Mustang horses both within and outside of the USA. An essential feature of markets for such lively commodities is developing “companionability,” that is, shaping the body, disposition, and environmental needs of a wild horse in accordance with the demands of commodification, thereby transforming it into a domestic horse to serve as a human companion. Companionability is a prerequisite for mustangs’ marketability and a central aspect for the emergence of encounter value. This article applies the phenomenological concept of corporeal communication to elucidate the implications of these processes, using the example of a multi-day auction event, Mustang Makeover Germany.

Fitness for transport of cull dairy cows at livestock markets

Cows are regularly removed from dairy herds and sold at livestock markets. Many cows are removed because of health problems, and their fitness for transport may vary because of seasonal variation, delayed or poor on-farm culling decisions, injuries during transport, and other factors. However, many dairy producers lack feedback about the condition of their cows during the marketing process and how cow condition influences sale price. This study evaluated the condition of cull dairy cows sold at livestock markets, tested how changing demand for milk influenced fitness for transport, and quantified how cow condition affected the price paid. For 12 mo, 2 livestock markets in British Columbia, Canada, were visited during 137 auction events when cull dairy cows were sold; 3 trained assessors observed 6,263 cull dairy cows while they were marketed in a sale ring. Observers recorded the cows' body condition score (BCS), locomotion score (LS), udder condition, quality defects (e.g., injuries, illness), and price. Logistic regression was used to test how month-to-month changes in demand for milk affected cows' fitness for transport, and a linear mixed model assessed how the animals' condition influenced the price. About 10% of the cows were thin (BCS ≤2), 7% were severely lame (locomotion score ≥4), 13% had engorged or inflamed udders, and 6% had other quality defects including abscesses, injuries, and signs of sickness (e.g., pneumonia). Cows culled during months with increased milk demand had much higher odds of poor fitness for transport (odds ratio 8.6, 95% confidence interval: 4.02-18.22). The price was most reduced if cows were thin (BCS ≤2) or visibly sick (-$0.63 ± 0.01/kg and -$0.56 ± 0.02/kg, respectively). Prices were reduced to a lesser degree by locomotion score ≥4 (-$0.35 ± 0.02/kg) and by udder condition (udder inflammation; -$0.30 ± 0.02/kg). Overall fitness for transport reduced the price by $0.51 ± 0.01/kg. In summary, about 30% of the cows sold at livestock markets had poor fitness for transport, which was partially influenced by increased milk demand and resulted in reduced market prices.

Study of Open and Sealed Auctions in Astra Credit Companies Using Batna and Zopa

Decision made by the finance companies in solving the bad credit problems is through the withdrawal of vehicles that have been financed, then sell them through the auction system. Truck withdrawal unit is the one with the highest auction frequency. The higher the auction frequency, the lower the vehicle’s minimum price will become or the price will drop. The purposes of this study are to determine the best alternative to be carried out by Astra Credit Companies when analyzed using BATNA in open ascending and sealed highest bid auctions, and to know the price range and condition class of the auction unit that allows for an agreement to take place when analyzed using ZOPA. Based on the type, this is a descriptive qualitative research involving longitudinal observations. The data was collected through interviews with the representatives of Astra Credit Companies and the bidders, observations of the auction processes, and analyses of the auction result’s documentations study. The results reveal that open auction generates higher sales than the sealed one, but the biggest margin between the minimum price and the selling price takes place in the sealed auction. The amount of the minimum price depends on the condition class and the frequency of the auction events of each unit. The suggestion that can be implemented based on the research results for the companies is that they should provide information on an ongoing basis for the prospective bidders or partnering dealers to increase their participations. The maximum payment is results from the sales of ISUZU NKR71HD WOODEN TRUCK (sealed auction) and NKR71 HDDUMPTRK (open auction).

Collusion in Dynamic Buyer-Determined Reverse Auctions

Although binding reverse auctions have attracted a good deal of interest in the academic literature, in practice, dynamic nonbinding reverse auctions are the norm in procurement. In those, suppliers submit price quotes and can respond to quotes of their competitors during a live auction event. However, the lowest quote does not necessarily determine the winner. The buyer decides after the contest, taking further supplier information into account, on who will be awarded the contract. We show, both theoretically and empirically, that this bidding format enables suppliers to collude, thus leading to noncompetitive prices. This paper was accepted by Teck-Hua Ho, behavioral economics.

Market response to land auction events: a transaction volume approach

Purpose– The purpose of this paper is to investigate the response of transaction volume in Hong Kong’s housing market to public land auctions.Design/methodology/approach– An event study approach with the use of regression analyses was adopted for the empirical study.Findings– Fewer pre-event transactions in the secondary housing spot market come with greater dispersion in the pre-event forecasts of land auction outcomes. Unexpected auction outcomes were also found to minify the post-event transaction volume in the secondary housing spot market, with negative unexpected outcomes exerting a stronger downward force.Research limitations/implications– These findings are contrary to the empirical evidence commonly found in most financial literature on stock transaction volume around corporate earnings announcements with an assumption of negligible transaction costs. Imperfect market structure, differences in sellers’ and buyers’ characteristics and short-sale restriction may explain the disparity.Practical implications– Price in the secondary housing market is more sensitive to negative unexpected land auction outcomes. The analysis results of the current study attest that the impact exerted by the negative unexpected auction outcomes on transaction volume in the housing spot market is stronger than that of positive unexpected auction outcomes.Originality/value– Unlike price and return, transaction volume has not received substantial academic attention in property research. In particular, within the existing small body of transaction volume research, the impact of information events on trading activities has been largely ignored.

Identifying Stock Market Reactions to Acquisition Announcements in Taiwan Land Auction

This paper examines the market reactions to acquisition announcements in Taiwan land auctions. Empirical evidence shows that successful bidders can enjoy significant positive abnormal returns as a result of land auction events. Specifically, successful acquisitions in Taiwan land auction have an intra-industry contagion effect. The land size and the market atmosphere before the auction events benefit the stock market reactions.

Selling Patents at Auction: An Empirical Analysis of Patent Value

This paper analyzes the impact of patent bibliographic indicators and patent characteristics on the economic value of patents put on sale in an auction, considering different typologies of sellers and buyers. A unique dataset covering all patent auctions held until the end of 2008 by Ocean Tomo is used. We employ two measures of patent value drawn from the auction process: the offer price (ex-ante value set by the seller) and the closing price (the market-value determined by the buyers) of patent lots. We find a positive correlation between forward citations and the economic value of patents, while backward citations have a positive and significant impact on the lot offer price, but turn to be negatively related to the lot closing price. The number of claims does not affect significantly the lot offer price, while it has a clear positive impact on the lot closing price. Also, the degree of technological congruence of the patents included in a lot, which is positively and significantly related to the lot offer price, turns to be still positive but not significant if we consider the lot closing price. This evidence is interpreted in the light of the different typologies of buyers and sellers participating at the auction event.

Increasing Revenue by Decreasing Information in Procurement Auctions

We report on results of several laboratory experiments that investigate on‐line procurement auctions in which suppliers bid on price, but exogenous bidder quality affects winner determination. In procurement auctions, bidder quality may or may not be publicly known to all bidders, and the effect of this quality transparency on the auction outcome is one aspect of auction design that we examine. The second aspect of auction design that we examine is the effect of price visibility on the auction outcome, and the interaction between price visibility and quality transparency. In terms of price visibility, we consider two extreme cases: the sealed bid request for proposals (RFPs), and the open‐bid dynamic auction event. In terms of bidder quality transparency, we also consider two extreme cases: a setting in which bidder qualities are publicly known and the case in which they are private. We find that in our laboratory experiments, the RFP format is consistent in generating higher buyer surplus levels than does the open‐bid dynamic format. This advantage is independent of the quality transparency. In contrast, the open‐bid format is highly sensitive to quality transparency, generating significantly lower buyer surplus levels when the information about bidder quality is public.

A Laboratory Investigation of Rank Feedback in Procurement Auctions

A popular procurement auction format is one in which bidders compete during a live auction event but observe only the rank of their own bid and not the price bids of their competitors. We investigate the performance of auctions with rank feedback in a simple setting for which analytical benchmarks are readily available. We test these benchmarks in the laboratory by comparing the performance of auctions with rank-based feedback to auctions with full-price feedback as well as to auctions with no price feedback (sealed-bid auctions). When bidders are risk-neutral expected-profit maximizers, the buyer's expected costs should be the same under rank and full-price feedback; moreover, expected buyer costs should be the same as in a sealed-bid auction. However, when we test this theoretical equality in a controlled laboratory setting we find that, consistent with practitioners' beliefs but contrary to our model, rank feedback results in lower average prices than full-price feedback. We identify two behavioral reasons for the difference. The first explanation is based on the similarity of the bidders' problem in a sealed-bid first-price auction and an open-bid auction with rank feedback. The second explanation incorporates the use of jump bids motivated by bidder impatience.

Understanding auction fever: a framework for emotional bidding

Auction fever is a multifaceted phenomenon that is frequently observed in both traditional and Internet auctions. In order to gain a better understanding of its causes, we develop a conceptual framework to analyze emotions in auctions, which is based on an exhaustive literature review. The framework integrates rational calculus with emotional aspects and suggests that emotional processing is triggered at three different stages of an auction: First, the economic environment can affect a bidder’s level of perceived competition and thus influence the bidding strategy prior to the auction. Second, auction events may have ramifications on the bidder’s emotional state during the auction due to previous investments or perceived ownership. Third, past auction outcomes may impact future bidding behavior through emotions such as the joy of winning or loser regret. Auction fever, eventually, is a phenomenon that results from the interplay of these emotional processes and causes a bidder to deviate from an initially chosen bidding strategy.

Market Sentiments, Winner’s Curse and Bidding Outcome in Land Auctions

This paper empirically tests auction theory by examining how the stock market evaluates the outcome of open-bid English auctions of rights to develop residential real estate projects in Hong Kong. To do so, we deconstruct the complexity surrounding actual auction events, and empirically isolate the influence of conflicting auction theory predictions using data from expert opinion around auction events, actual auction event and outcome data, and stock market data. The empirical findings include (1) with increasing uncertainty bidders reduce bids, thus confirming predictions following the winner’s curse thesis; (2) joint bidding does not lead to increased bids based on pooled (“better”) information, but instead leads to reduced competition; while increased competition leads to increased prices at auction, as expected; (3) the market interprets auction outcomes as information events which function to signal developers’ expectations about future market prospects; but if the winning bid is considered too high, this interpretation is revised to that of the winner’s curse; (4) with joint bidding and winning, the market’s response to joint winners is better explained by concern for winner’s curse (despite supposed better informed bids) than the acquisition of a below cost development project following reduced competition at auction; and (5) the market interprets increased competition at auction as indicator of the future direction of property price movements in the secondary market—the more intense the competition, the more positive the future prospect of the property market are seen to be.

Strong activity rules for iterative combinatorial auctions

Activity rules have emerged in recent years as an important aspect of practical auction design. The role of an activity rule in an iterative auction is to suppress strategic behavior by bidders and promote simple, continual, meaningful bidding and thus, price discovery. These rules find application in the design of iterative combinatorial auctions for real world scenarios, for example in spectrum auctions, in airline landing slot auctions, and in procurement auctions. We introduce the notion of strong activity rules, which allow simple, consistent bidding strategies while precluding all behaviors that cannot be rationalized in this way. We design such a rule for auctions with budget-constrained bidders, i.e., bidders with valuations for resources that are greater than their ability to pay. Such bidders are of practical importance in many market environments, and hindered from bidding in a simple and consistent way by the commonly used revealed-preference activity rule, which is too strong in such an environment. We consider issues of complexity, and provide two useful forms of information feedback to guide bidders in meeting strong activity rules. As a special case, we derive a strong activity rule for non-budget-constrained bidders. The ultimate choice of activity rule must depend, in part, on beliefs about the types of bidders likely to participate in an auction event because one cannot have a rule that is simultaneously strong for both budget-constrained bidders and quasi-linear bidders.

An options-based solution to the sequential auction problem

The sequential auction problem is commonplace in open, electronic marketplaces such as eBay. This is the problem where a buyer has no dominant strategy in bidding across multiple auctions when the buyer would have a simple, truth-revealing strategy if there was but a single auction event. Our model allows for multiple, distinct goods and market dynamics with buyers and sellers that arrive over time. Sellers each bring a single unit of a good to the market while buyers can have values on bundles of goods. We model each individual auction as a second-price (Vickrey) auction and propose an options-based, proxied solution to provide price and winner-determination coordination across auctions. While still allowing for temporally uncoordinated market participation, this options-based approach solves the sequential auction problem and provides truthful bidding as a weakly dominant strategy for buyers. An empirical study suggests that this coordination can enable a significant efficiency and revenue improvement over the current eBay market design, and highlights the effect on performance of complex buyer valuations (buyers with substitutes and complements valuations) and varying the market liquidity.

The Bread/Flour/Grain Trading Game: Bidding in and Designing Auction Events

Strategic sourcing and more specifically, e-procurement have become part of standard industry practice in recent years with the use of forward and reverse auction events. Training materials and games to teach participants to bid in and design such events, however, has been limited. In this paper we describe a Bread/Flour/Grain trading game we developed for instructors to use with student groups. We also provide accompanying materials and suggestions for running and debriefing of the game. The game imparts design and bidding experience, which students can then apply to real world auction events. It is appropriate for group sizes ranging from six to sixty.

IntelliBid: An Event-Trigger-Rule-Based Auction System over the Internet

This paper presents the design and implementation of an Event-Trigger-Rule-Based auction system called IntelliBid. A network of Knowledge Web Servers, each consisting of a Web server, an Event-Trigger-Rule (ETR) Server, an Event Engine, a Knowledge Profile Manager, and Bid Servers and their proxies constitutes IntelliBid. Together, they provide auction-related services to the creator of an auction site and the bidders and suppliers of products. IntelliBid offers a number of desirable features. First and foremost is the flexibility offered to bidders for defining their own rules to control their bids in an automatic bidding process, which frees the bidders from having to be on-line to place bids. By using different rules, the bidders can apply different bidding strategies. Second, it furnishes valuable statistical information about past auctions to both suppliers (or sellers) and bidders. The information can assist a bidder in bidding and a seller in setting a reasonable base price and/or the minimum incremental price. Third, since rules that control the automatic bidding are installed and processed by the ETR servers installed at bidders' individual sites, bidders' privacy and security are safeguarded. The statistical information that is released by IntelliBid only depicts the trend of the bidding prices of a product. The information about bidders is kept completely secret, thus safeguarding the privacy of the bidders. Fourth, IntelliBid's event, event filtering and event notification mechanisms keep both bidders and suppliers timely informed of auction events so that they or their software system can take the proper actions in the auction process. Fifth, any registered user of IntelliBid, bidder or supplier, can monitor the bids placed to any product being auctioned in IntelliBid. Sixth, IntelliBid allows bidders to do both on-line (or manual) bidding and automatic bidding. It also allows a bidder to participate in several auctions at the same time, in both manual and automated modes. The bidding of a product can depend on the result of the bidding of another product. Last, but not least, IntelliBid allows a person or organization to play both the role of bidder and the role of supplier simultaneously. The Profile Manager keeps the information as a bidder and information as a supplier separately. Moreover, IntelliBid's architecture uses a parallel event management system to do event registration and notification. This paper also reports the result of a performance study on the implication of using such a parallel system to achieve scalability.

November Auction Events

November Auction Events

November Auction Events

AbstractThe November sales at the American Art Association Anderson Galleries comprise paintings from a number of well known collections. The Raeburn, illustrated above, will be sold with a group of eighteenth century English portraits. It was formerly in the possession of Mr. Ralph Christie of Durie, Leven, Fife, Scotland.From the collection of the late Thomas Fortune Ryan come these two Neapolitan marble portrait busts, the work of a Florcntine master datingcirca 1425-1500.