Number Of Bidders Research Articles

Large all-pay auctions with IPV bidders

This note analyzes different types of all-pay auctions when the number of bidders becomes large. We compute the distributions of the highest bids for the first-price all pay auction and we show that the expected payment made by the winning bidder converges to half of the total payments. In the second-price all-pay auction (the war of attrition), the highest bid amounts to about 35.5% of the total revenues. We also compute the payments for all-pay auctions with multiple prizes.

Optimal Bidder Participation in Public Procurement Auctions

We present an easy-to-implement method to identify the optimal number of bidders in public procurement auctions. We examine a unique data set that covers all government procurement auctions comprising more than half a million observations. We show that there is an optimal number of bidders at which the minimum procurement price can be achieved. These results have several policy implications. Policy makers can use the easy-to-implement method to identify the optimal number of bidders and employ them as focal points to analyze whether competitive efficiency is achieved in public procurement auctions.

Does the World Trade Organization Government Procurement Agreement Deliver What It Promises?

The revised World Trade Organization (WTO) Government Procurement Agreement (GPA), which came into force on April 6, 2014, provides a limited number of WTO Members with a framework for ensuring that the tenders scheduled under the Appendix to WTO GPA are conducted in a competitive, non-discriminatory, and transparent manner satisfying the conditions on integrity. The purpose of this paper is to analyze empirically whether the WTO GPA is effective in promoting non-discriminant, open, transparent, competitive and efficient government procurement. To study this question, we make use of the micro-level data set released recently by the European Union (EU) covering more than 3 million tenders conducted in the European Economic Area (EEA), Switzerland and Macedonia during the years 2006-2015. We have four major results. First, the likelihood that the contract is awarded to a foreign firm is significantly higher when the contract is covered by the WTO GPA. Second, number of bidders are significantly higher in WTO GPA covered procurements. Third, we find that corruption risk is lower in WTO GPA covered tenders. We use two measures to assess corruption risk: procurements that receive only one bid, and the connection strength of a winning firm in the network of suppliers. We find that single bid procurement is significantly lower in tenders covered by the WTO GPA. Additionally, we conclude that the WTO GPA provides the opportunity for less connected firms to win contracts. Finally, we find that the WTO GPA does not have a significant effect of procurement costs.

Konkurencyjność zamówień publicznych w Polsce na tle innych krajów Unii Europejskiej

Competitiveness of public procurement market is rarely subject of scientific economic investigations. The Polish public procurement law takes into account mechanisms of competing economic units, however the main goal of contracting authorities is to conduct a public procurement procedure in the way to enable a realization of public contract. The work analyses legal framework for public procurement in relation to the Polish market using data coming from sources: published by the Bulletin of Public Procurement (values less than the EU thresholds) and Tenders Electronic Daily (contracts with values higher than the EU thresholds) according to three groups of contracts: supplies, construction works and services in the time periods 2000–2014 and 2010–2013, respectively. Empirical results, based mainly on the average number of bids for each tender, prove that Poland is still at the end of rank list of the EU countries. Macroeconomic approach to the subject of competitiveness of public procurement market may be misleading because the public procurements play not only economic function, but mainly social and environmental ones.

Effects of Price-Adjustment Clauses on Number of Bidders and Dispersion of Bid Prices in Highway Construction

Effects of Price-Adjustment Clauses on Number of Bidders and Dispersion of Bid Prices in Highway Construction

Mid-auction information acquisition

An English auction is studied in which bidders can acquire information during the bidding process, allowing for heterogeneity both in ex-ante private information and the cost of information acquisition. The best response has a simple characterization where the optimal information acquisition time is unaffected by the other bidders’ strategies. We prove the existence of an equilibrium in a novel way by characterizing it as a fixed point in the space of bid distributions rather than the space of bid functions. Furthermore, we show that when bidders have homogeneous ex-ante private information about valuations: (1) The English auction generates more revenue than the Vickrey auction when the number of bidders is sufficiently large; and (2) the English auction is more efficient than the Vickrey auction when the information acquisition cost are relatively small. We present numerical simulations that show that these effects can be large. Our findings provide an additional explanation for the popularity of the English auction, even in settings where the bidders’ valuations are independent.

Probably Approximately Efficient Combinatorial Auctions via Machine Learning

A well-known problem in combinatorial auctions (CAs) is that the value space grows exponentially in the number of goods, which often puts a large burden on the bidders and on the auctioneer. In this paper, we introduce a new design paradigm for CAs based on machine learning (ML). Bidders report their values (bids) to a proxy agent by answering a small number of value queries. The proxy agent then uses an ML algorithm to generalize from those bids to the whole value space, and the efficient allocation is computed based on the generalized valuations. We introduce the concept of "probably approximate efficiency (PAE)" to measure the efficiency of the new ML-based auctions, and we formally show how the generelizability of an ML algorithm relates to the efficiency loss incurred by the corresponding ML-based auction. To instantiate our paradigm, we use support vector regression (SVR) as our ML algorithm, which enables us to keep the winner determination problem of the CA tractable. Different parameters of the SVR algorithm allow us to trade off the expressiveness, economic efficiency, and computational efficiency of the CA. Finally, we demonstrate experimentally that, even with a small number of bids, our ML-based auctions are highly efficient with high probability.

If Winning isn't Everything, Why do they keep Score? A Structural Empirical Analysis of Dutch Flower Auctions

This paper provides a structural empirical analysis of Dutch auctions of houseplants at the flower auction in Aalsmeer, the Netherlands. The data set is unique for Dutch auctions in the sense that it includes observations of all losing bids in an interval adjacent to the winning bid. The size of this interval is determined by the speed of reaction of the auction participants, and as such these data are collectible due to neurological constraints on information processing. The data on losing bids are shown to be informative on the structural model determinants. The models are estimated using the Gibbs sampler with data augmentation. We take account of data limitations concerning the number of bidders. The estimation results are used to investigate whether actual reserve prices are optimal, and to determine the effects of reserve price changes.

How Do Valuations Impact Outcomes of Asset Sales with Heterogeneous Bidders?

Differences among bidder type-specific outcomes of asset sales that attract multiple types of bidders are theoretically related to differences in their average valuations, valuation dispersions, and participation. The lead application to quantify these relationships is takeover auctions: bidders are classified into strategic and financial, and their bids are available. I structurally estimate valuations from all bids. The positive difference in premiums paid by strategic and financial bidders is primarily affected by the difference in dispersions of valuations (e.g., strategic but not financial bidders’ synergies are highly dispersed) and the number of bidders of each type. Contrary to common intuition, the difference in average valuations is relatively unimportant. My empirical model is general enough to help explain differences among average payments in other competitive settings with heterogeneous bidders, even when bidder data is limited.

Agent-based simulation of multiple-round timber combinatorial auction

This paper presents a simulation-based analysis of a multiple-round timber combinatorial auction in the timber industry. Currently, most timber auctions are single-unit auctions (i.e., each forest stand is sold separately). However, other types of auctions could be applied to take advantage of the various needs of the bidders with respect to species, volumes, and quality. This study aims to analyze the use of combinatorial auction to this specific context using a simulation approach. Various number of auctions per year, periodicity, lot size, and number of bidders are considered as parameters to set up the different market configurations. The outcomes of both combinatorial auction and single-unit auction are compared with respect to different setup configurations. This analysis shows that combinatorial auction can bring more profit for both seller and buyer when the market is less competitive.

Auctions of the wood on the stump in PE "Srbijasume"

Forest assortments can be sold in two ways: ?on the stump? (in the standing state) and in the form of forest timber assortments. The paper analyzes auctions of wood ?on the stump?, during the first half of 2016, realized within PE ?Srbijasume?. The research is based on secondary data, generated from the PE Srbijasume reports. These includes data relating to: quantities of wood, initial bidding and auctioned prices, bidding effects, number of bidders on bids and a price list for a analzyed year. FE ?Sumarstvo? from Raska had the most auctions with 46 bids held. Of the total of 14 forest estates that conducted auctions, half had more than 50% of successfully implemented parties, two estates had exactly 50%, and five estates had less than 50%. FE ?Nis? has the highest income from auctions of wood in the standing state, which amounts to 26.082.926 dinars. Only FE from Uzice and FE from Prokuplje had a bidding effect of over 10%. The highest number of bids, as much as 70, was announced in March. Most of the lots entered the sixth category by size, i.e. the category where the wood volume ranged from 300 to 500 m3. Forest estates during the sale of the tree on the stump were mostly sold by wood of hardwoods. On the basis of the analyzed data, the existence of linear dependence between the initial and the auctioned price was determined.

Signaling, Bidding and the Final Price in the Online Auction Platform Almost Without Information Asymmetry: An Empirical Study on China's Largest B2C Marketplace

Business-to-customer (B2C) online auctions differ from customer-to-customer (C2C) online auctions by having much less sellers who have established their reputations. Thus, B2C online auctions face much lower levels of information asymmetry and relies more on seller’s signaling and buyers’ bidding to determine the final price. This paper uses the second-hand product auction data from Jingdong, the largest B2C electronic market in China, to understand the determinants of the final price in B2C online auctions. We find that the signaling from the single seller and the bidding from the buyers can almost fully explain the final price, where the signaling is much more important than the demand side’s bidding, and posting the price of new product selling in the online market is the most effective signaling. These findings are robust after controlling the endogeneity of the number of bidders. Results from Quantile IV Regression further show that the valuation-reference role of the seller’s signaling such as posting the price of new product and the newness levels of the product decreases with the value of product price while the role of bidding behaviors such as the number and the heterogeneity of bidders increases with that value.

Competition in a Dynamic Auction Market: Identification, Structural Estimation, and Market Efficiency

The model incorporates an infinite series of auctions for identical items (or close substitutes) ordered over time and bidders with unit demand. The participants of each auction are drawn from a dynamic pool, with losing bidders remaining in the pool of potential bidders. The number of bidders in each auction is unobservable. Risk‐neutral, forward‐looking bidders submit bids below valuation. A novel identification and estimation strategy is used to estimate the valuation distribution from an order statistic of the bids. The model is used to evaluate the efficiency of online auctions for a 60GB Apple iPod Video, compared to a perfect‐competition benchmark.

Cheap Talk Advertising in Auctions: Horizontally vs Vertically Differentiated Products

This paper explores the possibilities for sellers to usefully transmit product information to buyers by cheap talk public advertising. We explore two polar cases, contrasting vertically differentiated products (a la Milgrom Weber's (1982) general symmetric model) with horizontally differentiated products (a la Hotelling's (1929) line). We consider both the message only case and where reserve price-message pairs can be chosen by the seller. For horizontally differentiated products partitional message-only informative equilibria are shown to exist providing the number of bidders is sufficiently large. The equilibrium is characterized by more precise information provided for less popular product attributes. The seller optimal disclosure policy displays a complementarity relationship between the number of bidders and the amount of product information disclosed. In contrast, for the vertically differentiated products benchmark, message-only informative equilibria do not exist. With reserve prices, informative equilibria exist in both cases. For the vertical case these equilibria yield lower seller revenue than uninformative equilibria. In the horizontal case with sufficiently large number of bidders higher revenue is possible and full disclosure becomes feasible and seller optimal in the limit.

A shape constrained estimator of bidding function of first-price sealed-bid auctions

This paper is concerned with economic analysis of first-price sealed-bid auctions with risk averse bidders. The identification is based on exogenous variations in the number of bidders across auctions. We present a shape constrained estimator of the bidding function, which satisfies the theoretical properties of passing through origin, positivity and monotonicity. The underlying utility function and bidder value distribution are readily obtained from the estimated bidding function. Monte Carlo simulations demonstrate good performance of the proposed estimator.

Endogenous Entry to Security-Bid Auctions

We endogenize entry to a security-bid auction, where participation is costly and bidders must decide given their private valuations whether to participate. We first consider any minimum reserve security-bid of a fixed expected value that weakly exceeds the asset's value when retained by the seller. DeMarzo, Kremer, and Skrzypacz (2005) establish that with a fixed number of bidders, auctions with steeper securities yield the seller more revenues. Counterintuitively, we find that auctions with steeper securities also attract more entry, further enhancing the revenues from such auctions. We then establish that with optimal reserve securities, auctions with steeper securities always yield higher expected revenues. (JEL D44)

When Does Improved Targeting Increase Revenue?

In second-price auctions, we find that improved targeting via enhanced information disclosure decreases revenue when there are two bidders and increases revenue if there are at least four symmetric bidders with values drawn from a distribution with a monotone hazard rate. With asymmetries, improved targeting increases revenue if the most frequent winner wins less than 30.4% of the time under a model in which shares are well defined, but can decrease revenue otherwise. We derive analogous results for position auctions. Finally, we show that revenue can vary nonmonotonically with the number of bidders who are able to take advantage of improved targeting.

Further Econometric Evidence on the Extent and Sources of Cost Savings in Competitively Tendered Contracts

By estimating a flexible nonlinear regression model of savings on an original data set of service procurements conducted by the Spanish Armed Forces, this paper provides robust and precise novel econometric evidence on the extent and sources of cost savings in public procurement. The net effect on savings of the policy-amenable and economically advantageous variables that we estimate, such as the size of the procured function, the importance of price in the contract award criteria, and the number of bidders who participate in the tender, may help contracting agencies to select management practices and to forecast the price paid out. A comparison with estimates reported in previous studies is also made.

Bidding competitiveness: a comparative analysis of different bid auctions in Malaysia

PurposeThis research aims to contrast bid competitiveness with respect to the average bid auction (ABA) and the non-ABA bidding formats used by the Public Works Department (PWD) of Malaysia.Design/methodology/approachThe research uses the ordinary least square regression and the Monte–Carlo simulation to point out significant predictors which affect the bid ratio and fitting probability distributions to bidding data, respectively.FindingsThis research shows that the bidding strategy adopted is dependent on the different formats used. In the ABA format, bidders are more likely to submit identical bid prices. In the non-ABA format, they bid according to the first-price auction strategy, which suggests greater variation between bid prices as a winning strategy and the reduction in the bid price to an estimated price ratio when more bidders bid.Practical implicationsBidders lose more money when the distance between the project location and a firm’s operational office is greater. Best-fit probability density functions follow a gamma distribution for the ABA format and a Weibull distribution for the non-ABA format. The location and number of bidders affect bidders’ strategy to win.Originality/valueThis research presents empirical insights concerning the comparisons of different type of bidding formats practiced by PWD of Malaysia and its implications on the construction companies’ bidding behaviors especially when it comes to its economic consequences. The significant factors that affect the different auction mechanisms used can serve as a basis for improving the present methods employed by PWD and in other countries.

An Experimental Investigation of Procurement Auctions with Asymmetric Sellers

Electronic reverse auctions are a commonly used procurement mechanism. Research to date has focused on suppliers who are ex ante symmetric in that their costs are drawn from a common distribution. However, in many cases, a seller's range of potential costs depends on their own operations, location, or economies of scale and scope. Thus, understanding how different bidder types impact auction outcomes is key when designing an auction. This study reports the results of the first controlled laboratory experiment designed to compare prices between first‐price and second‐price procurement auctions for homogeneous goods when seller cost types are asymmetric and the number of bidders varies. The results indicate that first‐price auctions generate lower prices regardless of market composition. The results also reveal that first‐price auctions are at least weakly more efficient than second‐price auctions despite the theoretical prediction that the reverse should hold in asymmetric auctions. Post hoc analysis of individual bidders' behavior in first‐price auctions revealed evidence that bidders systematically underbid when their cost realizations were close to the lower bound. Furthermore, bidders adjust their behavior based on the type of the other bidders in the market in a manner inconsistent with theory. Consequently, adding a third bidder to a two‐bidder market is not advantageous to the buyer unless that third bidder is a low‐cost type.