Bidding Competition Research Articles

Peer Exchange for Improving Accuracy of the Engineer’s Estimate for Highway Improvement Projects

The Wisconsin Department of Transportation hosted a peer exchange in 2021 to discuss topics related to improving procedures for developing the engineer’s estimate. The goal was to improve accuracy of engineers’ estimates by providing a forum for the exchange of ideas, lessons learned, and opportunities for the development of state-to-state relationships for continued improvements. Before the peer exchange, invited State Highway Agencies (SHAs) were asked to fill out an online survey to obtain preliminary information about their estimating procedures and practices, organizational approach, measurements of estimating accuracy and bidding history. Representatives from 16 SHAs responded to the survey and representatives from 11 SHAs and the Federal Highway Agency participated in the peer exchange. This article presents the results of the survey and a summary of the discussions during the peer exchange so that other SHAs can learn from them. The peer exchange provided a summary of the state of practice of the SHAs in preparing the engineer’s estimate and identified the following list of most impactful factors for differences between the engineer’s estimate and bidding results: low bid competition, geographic location, outdated data used in historical bid-based estimating, shortage of skilled workers and time, and market volatility. Discussions during the peer exchange uncovered how individual SHAs are approaching and dealing with these factors and those results are presented in the article. Other SHAs will benefit from the summaries of other SHAs’ current practices and the action items Wisconsin Department of Transportation identified resulting from the peer exchange.

News Bias in Financial Journalists’ Social Networks

ABSTRACTConnected financial journalists—those with working relationships, common school ties, or social media connections to company management—introduce a marked media slant into their news coverage. Using a comprehensive set of newspaper articles covering mergers and acquisition (M&A) transactions from 1997 to 2016, I find that connected journalists use significantly fewer negative words in their coverage of connected acquirers. These journalists are also more likely to quote connected executives and include less accurate language in their reporting. Moreover, they tend to portray other firms in the same network in a less negative light. Journalists’ favoritism bias has implications for both capital market outcomes and their careers. I find that acquirers whose M&As are covered by connected journalists receive significantly higher stock returns on the news article publication date. However, these acquirers’ stock prices reverse in the long term, suggesting market overreaction to news covered by connected journalists. Around M&A transactions, connected articles are correlated with increased bid competition and deal premiums. In terms of future career development, connected journalists are more likely to leave journalism and join their associated industries in the long run. Taken together, the evidence suggests that financial journalists’ personal networks promote news bias that potentially hinders the efficient dissemination of information.

Network Theory–Based Approach to Data-Driven Assessment of Bidding Competition in Highway Construction

Network Theory–Based Approach to Data-Driven Assessment of Bidding Competition in Highway Construction

Assimilation Effects in Financial Markets

AbstractAn assimilation bias occurs when people’s evaluative judgment is positively influenced by a previously observed signal. We study this effect by examining investors’ appraisal of M&A deals announced 1 day after other firms in the same 1-digit SIC as the merging parties release earnings surprises. Consistent with assimilation effects, acquirers’ M&A announcement stock return initially correlates with the previous day’s earnings surprises. This effect reverses after 1 week. Assimilation generates other distortions as more positive surprises are related to increases in bid competition, takeover premiums, and withdrawn M&As. Evidence from IPOs corroborates the presence of assimilation effects in financial markets.

Strategic underleveraging and acquisitions

This paper investigates the Morellec and Zhdanov (2008) (MZ) prediction that firms strategically underleverage to win takeover contests. We document support for several specific MZ model predictions: pre-bid underleveraging increases with bidding competition, synergies offered by targets, investment type, industry concentration, and with firms actively adjusting their capital structure in advance of bidding. An empirically verified financial frictions explanation does not fully account for these patterns. Taken together, we find consistent evidence that strategic underleveraging conditional on the acquisition outlook is an important determinant of capital structure dynamics.

Philosophy of bridge building

The author presents a philosophical interpretation of the contribution of bridge construction to the development of civilization. Bridges have always been an important element of civilization, an instrument of human interaction with each other and with nature, an object of not only physical, but, above all, intellectual human activity. Therefore, their philosophical understanding, penetration into the logic and dialectics of the development of bridge construction is justified and necessary. The following main factors determine the development of bridge construction: concept and criteria, requirements, competition, experience and information. The concept of the projected bridge should take into account the categories of purpose, reliability, economy, traditions, the level of design achieved, personal preferences and experience of the designer. The goal pursued by the construction of a specific bridge in a specific location is determined mainly by current needs, is formulated in the Terms of Reference and is regulated by the levels of consumer properties set in the norms. At the same time, the criteria of strength and reliability must be observed throughout the entire life cycle. The level of reliability is provided by design standards. The requirements for bridges should contain social, technical and humanitarian aspects. The economy is almost always, at least in our country, the main criterion when choosing a bridge option. Competition is one of the main conditions for the development of nature and human society. There are three types of competition in the field of bridge construction: between different countries (competition of prestige), competition of scientific and design schools, competition in bidding. Experience and information are important for the development of bridge construction. We are talking here about the collective experience of the bridge community. An effective means of exchanging experience and ideas is technical literature, and above all, technical journals and collections, various bridge forums.

Prevailing Wage Repeal, Highway Construction Costs, and Bid Competition in Kentucky: A Difference-in-Differences and Fixed Effects Analysis

Data for over 2,000 highway pavement projects, constructed between 2014 and 2020, are used to examine the effect of Kentucky’s prevailing wage repeal in 2017 on relative bid costs and bid competition for state and federally funded work. Other than Davis-Bacon and Disadvantaged Business Enterprise policies for federal projects, and prevailing wage requirements on state-funded work prior to 2017, all highway construction in Kentucky is built to the same standard. A difference-in-differences and fixed effects analysis fails to find statistically significant differences in bid costs and competition between federal and state projects before and after repeal. Competition on pavement projects in Kentucky is very low compared to other states. Consequently, the impact of increased competition on bid costs is very high. Policies increasing competition in Kentucky would be more effective in reducing costs than prevailing wage repeal.

Competing Combinatorial Auctions

Combinatorial auctions are auctions in which bids can be submitted on sets of items, rather than just on individual items. These auctions are generally beneficial to both auctioneers and bidders, as they allow bidders to express their synergies for sets of items. In recent years, we have seen the advent of combinatorial auctions as well as the emergence of online market platforms with competing auctioneers. However, combinatorial auctions have largely been absent from these platforms. Our article provides an explanation for this absence by demonstrating that competition between auctioneers can reduce the attractiveness of offering combinatorial auctions. Specifically, we show that auctioneers can limit competitive pressure between themselves by allowing bids only on specific packages, where these packages differ between auctioneers. This results in market segmentation, which increases bidder competition, and consequently increases auctioneer revenues. These findings have implications for market design. In particular they imply that, for an online market platform having multiple sellers offering auctions to the same set of buyers, it might not be advantageous to offer combinatorial auctions as a design option to the competing sellers.

Effectiveness of Auctions in Securing Price Support for Farmers: The Case of a Grain Market in India

Abstract This paper reviews rice procurement operations of Government of India from the standpoints of cost of procurement as well as effectiveness in supporting farmers’ incomes. The two channels in use for procuring rice till 2015, were custom milling of rice and levy. In the first, the government bought paddy directly from farmers at the minimum support price (MSP) and got it milled from private millers; while in the second, it purchased rice from private millers at a pre-announced levy price thus providing indirect price support to farmers. Secondary data reveal that levy, despite implying lower cost of procurement was discriminated against till about a decade back and eventually abolished in 2015 in favor of custom milling, better trusted to provide minimum price support. We analyze data from auctions of paddy from a year when levy was still important to investigate its impact on farmers’ revenues. We use semi-nonparametric estimates of millers’ values to simulate farmers’ expected revenues and find these to be rather close to the MSP; a closer analysis shows that bidder competition is critical to this result. Finally, we use our estimates to quantify the impact of change in levy price on farmers’ revenues and use this to discuss ways to revive the levy channel.

Barriers to PPP Projects in Construction Sector of Pakistan

Public Private Partnership (PPP) is a mechanism adopted to support the development in a country facing financial problems. In achieving successful PPP projects, one of the major criteria is attaining value for money. There are several barriers which can affect adoption of PPP which are essential to uncover for enhancing the adoption level of PPP. Hence, this project has focused on identifying barriers affecting PPP projects of Pakistan. Data collection for this study was done through questionnaire survey among the personnel involved in handling PPP projects. From statistical analysis of collected data it was found that unhealthy bid competition, lack of managerial skills and experience and public sector related problems are major barriers in adoption of value for money in PPP projects of Pakistan.

Does highway project bundling policy affect bidding competition? Insights from a mixed ordinal logistic model

Abstract Highway transportation project bundling can significantly reduce project delivery cost but could cause undesirable consequences such as reduced market competition. As such, bundling policy needs to be guided by a careful assessment of the potential impacts of bundling on bidding competition. This paper analyses the effect of project bundling policies on market competition using random-effects mixed ordinal logistic modelling, a probabilistic approach. The paper also investigates the variations of such effects across the different project types. The bundling policy factors that were found to be significantly impact bidding competition were the bundle size, bundling combination, and spatial proximity. The results suggest that bundled projects are generally associated with lower bidding competition compared to standalone projects, for all work categories except traffic projects. Further, where the bundled projects have proximal location, the bidding competition is generally higher. It was also determined that the different highway project types exhibit significant differences regarding the effect of bundling on competition: bundling policy (vis-a-vis standalone policy) generally leads to less intense competition for bridge, road, small-structures, miscellaneous, and utility projects, and more intense competition for traffic projects. In addition, it was found that there is a significant improvement on the model performance by including a random effects specification which diagnosed and addressed the unobserved heterogeneity that exists across the contract-letting years, for all the project types. The paper’s models can help highway agencies not only estimate the expected number of bidders for a given project under different bundling policies but also assess the effects of the bundling policy-related factors on bidding competition.

Talent development and labour market integration in European football

AbstractIn this paper, we argue that altered incentives for clubs to develop star players after the Bosman ruling can explain why European football has seen lower competitive balance in the Champions League but more competitive balance at the national level. By having a profound impact on the transfers of players within the European Union (EU), the Bosman ruling led to stiffer bidding competition over football stars. We show that this spurred talent development primarily in EU countries without established top clubs having a positive impact on their junior and senior national teams' performance. However, the stiffer bidding competition also led to a lower competitive balance in the Champions League, as non‐established clubs prefer to sell their star players instead of challenging the top clubs. We provide empirical evidence consistent with these findings.

Strategic Underleveraging and Acquisitions

This paper investigates the Morellec and Zhdanov (2008) prediction that firms strategically underleverage to win takeover contests. In line with the MZ commitment hypothesis, we find that greater pre-bid leverage reduction is linked to greater acquisition activity. We document support for three specific MZ model predictions: pre-merger underleveraging increases with (i) bidding competition, (ii) synergies offered by targets and (iii) transaction size. Our analysis rules out several explanations linked to financial flexibility as explanations for the results. We therefore find consistent evidence that strategic underleveraging conditional on the acquisition outlook is an important determinant of capital structure dynamics.

Analyzing bidding competitiveness and success rate of contractors competing for public construction projects

PurposeThe purpose of this paper is to analyze and evaluate bidding competitiveness and success rate of contractors bidding for public construction projects (PCPs). Additionally, this research determines the effect of work sector, contractor’s classification category (experience), project size and number of bidders on contractors’ bidding competitiveness, and the influence of work sector and classification category on their success rate.Design/methodology/approachThe data were collected through 2,296 bidding attempts for 289 tender projects that were announced by the Government Tenders Department in Jordan between 2013 and 2016. The research uses bid competitiveness percentage (BCP) to evaluate contractors’ bidding competitiveness. Pearson correlation is used to investigate the correlation among variables. Hypothesis testing using ANOVA was conducted to evaluate the effect of the abovementioned factors on contractors’ bidding competitiveness, and their success rate.FindingsThe results of the analysis indicate that contractors’ average BCP and success rate in Jordanian PCPs are 83.8% and 13.3%, respectively. The analysis also reveals that work sector, contractor’s classification category, project size and number of bidders significantly affect contractors’ bidding competitiveness, whereas classification category and work sector do not affect bidding success rate. Therefore, experience of contractors affects their bidding competitiveness, but does not affect their success rate.Originality/valueThe present research uses contractors’ bidding success rate as a measure to evaluate their bidding competitiveness for PCPs. The novel model of this research can be applied in any country, after considering local regulations, to measure and evaluate contractors’ bidding competitiveness, and success rate when bidding for PCPs. Also, contractors cannot depend on their experience (i.e. classification category) or increasing bidding attempts to win bids and improve bidding success rate, rather than enhance their bidding strategy.

Dynamic analysis of airline bidding game based on nonlinear cost

In this paper, a duopoly airlines bidding game model based on nonlinear variable cost is built, then local and global dynamic characteristics of this bidding game model are extensively researched, with the purpose of discussing the influences of price adjustment speed and of price elasticity coefficient on the evolving regularity of bidding competition of airline. We study the model from both theoretical and numerical simulation aspects. The local and global properties of the model in two-parameter space are analyzed. Moreover, we systematically research the regularity of dynamic evolution about attractors and topological structures of attractors in symmetric and asymmetric information. The simulation results show that there are local steady and multi-steady in this nonlinear model. The adjustment speed and price elasticity coefficient do have significant effects on the model, specifically, once the adjustment speed and price elasticity coefficient exceed the threshold, the game model will irreversibly enter into chaotic state after multiple bifurcations. Furthermore, the speed of price adjustment and the coefficient of price sensitivity have a significant impact on the nonlinear game model. Even subtle changes can cause the system enter bifurcation phenomenon so far as to chaos state. Therefore, the airlines need prudently adjust the parameters of game model in order to keep market competition in steady state in the long run.

Procuring NGA infrastructure: The performance of EMAT auctions in Italy

Italy was a patent laggard in the market roll-out of NGA networks. In 2015, the Italian Government introduced the “ultrabroadband strategy”, an ambitious policy agenda addressing the NGA market failures. This paper assesses the procurement policy assigning public concessions to build and manage passive infrastructure in “NGA white areas”: in detail, the techno-economic properties and outcomes of the auctions are analyzed, both theoretically and empirically. Because the applicable procurement law was the EU one, the EMAT scoring rules were mandatory. Relevant findings stand out, which confirm the received wisdom on first-price auctions, and extend it to high-tech sectors, where EMAT remains under-researched. First, the concession auctions unleashed vibrant bidding competition in many white areas, which enabled substantial budget savings. Second, the quality scoring rules provided adequate flexibility to prioritize the procurement of the most innovative and pro-competitive architectures (FTTH/B/P), despite the presence of high uncertainty. Third, the EMAT framework catered for a multidimensional procurement agenda; the latter targeted efficient and innovative procurement, universal service and higher market competition, while accommodating the ambitious industrial policy of the Government. Evidence of a potential trade-off between the plan implementation delay and its innovativeness emerged; such a conflict was eventually exacerbated by the bandwidth shortages generated by the COVID-19 crisis. By providing the very first study on EMAT auctions for broadband, this work stimulates future comparative research on additional EU member States.

Locational marginal price forecasting in a day-ahead power market using spatiotemporal deep learning network

Abstract Locational marginal pricing (LMP) in a deregulated electricity market is a result of bidding competition from nodes (locations). This paper presents a deep learning neural network for the 24 h-ahead LMP forecasting of a specific node in a zone at the PJM power market using other zonal prices. The presented method uses a Convolutional Neural Network (CNN), which is a well-known architecture for deep learning that has been applied successfully for image classification and pattern recognition. The CNN is used herein to extract features of real-time electricity prices by convolution, kernel, and pooling operations using spatiotemporal electricity prices in various zones and locations. The optimal parameters of the model were determined using a step-by-step manual approach to minimize the burden of brute force trial and error methods. Datasets from the PJM power market are used in simulations in which the proposed method is applied using Tensorflow and Keras Library. Various approaches are compared, and the results thus obtained demonstrate that the proposed method has higher accuracy than traditional methods in 24 h-ahead LMP forecasting.

Learning rivals' information in interdependent value auctions

We study a simple auction model with interdependent values in which there are two bidders each of whom observes a binary signal and can learn rival's information at a cost, whereafter they compete in the first-price or second-price auction. We characterize a unique symmetric equilibrium strategy—learning and bidding strategies—for the two auction formats. In the first-price auction, bidders with high signal learn rival's information with higher probability than those with low signal do. In the second-price auction, bidders never learn rival's information. The bidders' learning in the first-price auction causes an efficiency loss. Its impact on the seller's revenue depends on the parameter values. When the learning cost is low or values are sufficiently interdependent, the learning intensifies the bidding competition and thereby increases the revenue in the first-price auction, which means the learning entails an efficiency/revenue trade-off across the auctions formats. Otherwise, the first-price auction is dominated by the second-price auction in terms of both efficiency and revenue. Extensions of our model show the robustness of our results and intuition behind them.

The effect of prevailing wages on building costs, bid competition, and bidder behaviour: evidence from Ohio school construction

The Davis-Bacon Act and other state prevailing wage laws are instituted to, among other things, protect local compensation standards from possible degradations associated with public construction and create a level playing field for all competing contractors. The impact of prevailing wages on the cost of construction projects to the taxpayers is an issue that continues to be debated at the state and federal levels. In this paper, data from recent school construction projects in Ohio are used to examine the impact of federal prevailing wage standards on construction costs and bid competition. Results from the examination of all bids and winning bids indicate that prevailing wage requirements do not have a statistically significant effect on building costs or the level of bid competition. Results from endogenous treatment estimators provide additional evidence that the prevailing wage policy does not increase costs or limit competition. Additional analysis of all bids indicates that the cost-reducing effect of increased competition is stronger on projects covered by the prevailing wage policy.

Unintended Consequences of Nevada’s Ninety-Percent Prevailing Wage Rule

In 2015, the State of Nevada reduced prevailing wage rates on education-related construction to 90 percent of the applicable rate for other state-funded construction. The examination of projects built for Clark County School District between 2009 and 2108 indicates that Nevada’s wage policy has no statistically significant effect on school construction costs or bid competition, taking into consideration bids placed before and after the 2015 policy change. However, prevailing wage reductions on education projects motivated union contractors to pursue other opportunities as Nevada’s building industry expanded after 2015. Reduced participation in district bidding by union contractors contributed to a 25-percent overall decrease in bid competition and a 20-percent increase in bid costs following the 2015 policy change. While the goal of the 90-percent prevailing wage rule was to reduce the cost of building public schools, unforeseen consequences contributed to decreased bid competition and increased construction costs.