Number Of Bidders Research Articles

Estimating the number of new and repeated bidders in construction auctions

The number of new bidders – bidders from whom there is no previous registered participation – is an important variable in most bid tender forecasting models, since the unknown competitive profile of the former strongly limits the predictive accuracy of the latter. Analogously, when a bidder considers entering a bid or when an auctioneer is handling a procurement auction, assessing the likely proportion of experienced bidders is considered an important aspect, as some strategic decisions or even the awarding criteria might differ. However, estimating the number of bidders in a future auction that have not submitted a single bid yet is difficult, since there is no data at all linking their potential participation, an essential requirement for the implementation of any forecasting or estimation method. A practical approach is derived for determining the expected proportion of new bidders to frequent bidders as a function of the population of potential bidders. A multinomial model useful for selective and Open tendering is proposed and its performance is validated with a dataset of actual construction auctions. Final remarks concern the valuable information provided by the model to an enduring unsolved bidding problem and the prospects for new research continuations.

How Efficient are Decentralized Auction Platforms?

We provide a model of a decentralized, dynamic auction market platform (e.g., eBay) in which a large number of buyers and sellers participate in simultaneous, single-unit auctions each period. Our model accounts for the endogenous entry of agents and the impact of intertemporal optimization on bids. Solving our model with a finite number of bidders is computationally intractable due to the curse of dimensionality, so we prove that a continuum version of our model provides a good approximation of an equilibrium in the finite model. We use the approximation to estimate the structural primitives of our model using Kindle sales on eBay. We find that just over one third of Kindle auctions on eBay result in an inefficient allocation with deadweight loss amounting to 13.5% of total possible market surplus. We also find that partial centralization - for example, running half as many 2-unit, uniform price auctions each day - would eliminate a large fraction of the inefficiency, but yield lower seller revenues. Our results highlight the importance of understanding platform composition effects - selection of agents into the market - in assessing the implications of market design.

Reconsidering Carbon Permits Auction Mechanism: An Efficient Dynamic Model

AbstractOne of major concerns for China and developing countries is the new international trade rule concerning carbon emissions, which one needs to know its suitable mechanism and the possible implication on China's carbon trading market. Precisely, in an emission‐and‐trade scheme, an important question is whether the auction outcome is efficient, since this is closely related with the economic costs of emissions reduction. Due to the unique features of carbon permits, existing auction mechanisms do not seem to be suitable for their distribution. Inspired by the tâtonnement process, this paper proposes a new auction mechanism for them. For both practical application and theoretical extension, the discrete and continuous situations are examined, respectively. The result shows that the proposed auction converges to Pareto optimal equilibria, and that without ties, the equilibrium is unique. For bidders, the straightforward bidding strategy is the most preferred one, in the sense that the strategy makes them avoid the risk of loss. Intuitively, the auctioneer's utility is increasing in the number of bidders, while bidders’ pay‐off is increasing in permits. To a certain extent, the proposed auction mechanism resolves the confliction between efficiency and revenue in the multi‐item auction theory, while it increases people's understanding for carbon emission auction mechanism design.

Evaluating the car ownership control policy in Shanghai: a structural vector auto-regression approach

Beginning in 1986, Shanghai has implemented an interesting car ownership policy, namely an auction of the right to register private cars. In this paper, we propose a structural vector auto-regression (SVAR) approach to characterize the price formation process and to evaluate the performance of the Shanghai auction. We find three key results: (1) the price formation mechanism remained intact when the auction switched from on-site bidding to the two-stage format in 2008; (2) before 2008, short-term price fluctuations could be managed by varying the quota; after 2008, such manipulation ceased to be effective; (3) the number of bidders, or demand, ultimately drove the price in later years, casting doubt on the viability of the new price-controlled procedure that has created more than 250,000 bidders in waiting until April 2016. We also analyze how annual socio-economic variables affect quota, price, and the number of bidders using a simultaneous equations model. Due to data limitations, such an analysis is less conclusive. We argue that the SVAR framework can be improved and applied to other cities in evaluating their car ownership practices.

SPA: A Secure and Private Auction Framework for Decentralized Online Social Networks

The security and privacy threats on e-commerce have attracted intensive attention recently. The explosive growth of online social networks (OSNs) has made them potential new great marketplaces for e-commerce, which, however, raise serious security and privacyconcerns. This is mainly due to the centralized system architecture where the service provider knows all users’ private data and becomes the single point of failure. To this end, we propose a secure and private auction framework, called SPA, for decentralized online social networks (DOSNs). SPA consists of three phases: identity initiation, buyer-seller matching, and private auction. It requires no trust among the participants but can provide security, privacy, authenticity, non-repudiation, and correctness for the auctions. We analyze the computation and communication complexities of the proposed private auction scheme, which are $O(n+K)$ for each node where $n$ is the number of bidders and $K$ is the number of pricing points. In contrast, those of previous auction schemes are $O(nK)$ at best. The storage complexity is significantly lower than before as well. Security and privacy of SPA are also analyzed. Extensive experiments are conducted to validate the efficiency of SPA.

A transaction costs-based model to choose PPP procurement procedures

Purpose – The purpose of this paper is to develop a decision model for choosing the tendering procedure in PPP that minimizes the transaction costs borne by the public sector. Design/methodology/approach – A conceptual model that relates the procurement procedures described in the EU legal framework to launch PPPs and the transaction costs, considering the level of information managed by each procurement procedure has been developed. The authors use this conceptual model to develop propositions about the impact that specific project- and country-related factors have on the choice of the procurement procedure that minimizes the transaction costs. Findings – The application of the proposed model to the case of the Italian highway “Cispadana” shows its usefulness in orienting the public authority’s choice between the different tendering procedures, taking into account project- and country-related factors. Research limitations/implications – The present study fills the gap existing in the literature on transaction costs of PPP projects and the procurement procedure used to launch those projects by developing a model that relates the level of transaction costs with a set of key factors, namely the level of information managed during the tendering process, the number of bidders, the project size, the project complexity, and the institutional environment. Practical implications – As for practitioners, the main contribution of this study lies in offering a tool for supporting the public authority in the decision-making process about the tendering procedures in PPPs without imposing the selection of a specific procedure. Originality/value – The approach developed provides a new tool to support the contracting authority in the design and choice of the tendering procedures in PPP.

Industry Clustering and Financial Constraints: A Reinterpretation Based on Fixed Asset Liquidation

This article reinvestigates the effects of industry clustering on financial constraints, with a focus on the firm-bank interplay. In a model featuring asymmetrical information, firms pledge fixed assets as collateral for bank loans. The amount of borrowing is limited by the collateral’s market value. By increasing the number of bidders in the case of liquidation auctions, industry clustering raises the collateral’s market value and relaxes financial constraints. This effect is weaker if firms tend to receive a synchronized negative shock but is stronger if they tend to exhibit high valuation of fixed assets. These predictions are confirmed by China’s firm-level survey data. In particular, industry clustering reduces investment–cash flow sensitivity, and the effect is larger in industries with low correlations between sales values and GNP, large coefficients of variation of sales growth, and a large share of fixed assets in total assets. These conclusions are robust to model specifications and can be extended to analyses on various symptoms of financial constraints. They are also valid considering the issue of endogeneity.

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.

Pay-to-Bid Auctions

In this paper I analyze model of rational behavior of bidders taking part in penny auctions. I calibrate my model with parameters from actual auctions, I solve it for equilibria using numerical methods, and I run Monte Carlo simulations in order to get distribution of number of bids placed in an auction. As it turns out, the empirical distribution of bids does not match the simulated distribution of bids. The former stochastically dominates the latter. Average number of bids is on average much higher that theory predicts. There is a number of possible explanation why behavior of bidders does not conform to the model based on their rationality. One is that players are not risk-neutral. Another potential explanation is that players do not have perfect information.

Learning through Simultaneous Play: Evidence from Penny Auctions

This paper contributes to the emerging empirical literature on penny auctions, a particular type of all‐pay auctions. We focus on the potential learning effects that bidders may experience over time but also (and particularly) across auctions as a result of their auction participation. Using detailed bid‐level information, we find that, similarly to earlier literature, bidders suffer from a sunk cost fallacy, whereby their probability of dropping out of an auction is decreasing in the number of bids they have already placed in that auction. Although we do find that learning through repeated participation alleviates the sunk cost fallacy, participation in simultaneous penny auctions emerges as a much more effective learning mechanism, ultimately contributing toward bidders earning higher individual surpluses.

Fuzzy Regression Model Using Trapezoidal Fuzzy Numbers for Re-auction Data

Re-auction happens when a bid winner defaults on the payment without making second in-line purchase declaration even after determining sales permission. This is a process of selling under the court’s authority. Re-auctioning contract price of real estate is largely influenced by the real estate business, real estate value, and the number of bidders. This paper is designed to establish a statistical model that deals with the number of bidders participating especially in apartment re-auctioning. For these, diverse factors are taken into consideration, including ratio of minimum sales value from the point of selling to re-auctioning, number of bidders at the time of selling, investment value of the real estate, and so forth. As an attempt to consider ambiguous and vague factors, this paper presents a comparatively vague concept of real estate and bidders as trapezoid fuzzy number. Two different methods based on the least squares estimation are applied to fuzzy regression model in this paper. The first method is the estimating method applying substitution after obtaining the estimators of regression coefficients, and the other method is to estimate directly from the estimating procedure without substitution. These methods are provided in application for re-auction data, and appropriate performance measure is also provided to compare the accuracies.

Empirical Evidence on Competition and Revenue in an All-Pay Contest

The total revenue from an “all-pay contest” is the sum of expenditures from all individual players, so it is important to ask whether it increases with the number of actual players—which is our definition of competition. This is the first paper to use field data to study this question empirically. Using novel instrumental variables, we document strong empirical evidence that the revenue of a penny auction—which is a form of all-pay contest that recently emerged on the Internet—increases with the number of bidders. Our findings cast doubt on the standard model of all-pay contests that presumes that all bidders are fully informed.

Determinants of direct cross-border public procurement in EU Member States

The aim of this paper is to analyse the determinants of direct cross-border public procurement in the EU Member States. For this purpose, we use a unique dataset based on data published on Tenders Electronic Daily which covers public procurement contract award notices for the 2008–2012 period and consists of more than 30 variables. Among others, results of the econometric estimation suggest that the probability of awarding a contract cross-border depends positively on the value of the contract and negatively on the number of bids. Among awarding country characteristics, GDP per capita and trade-to-GDP ratio are found to positively impact the probability of a cross-border award. Our results also provide econometric evidence for predictions from the economic theory. We make the case for the importance of product market regulation indicators used as proxies for anticompetitive practices, such as regulatory protection of incumbent firms and barriers to foreign direct investment, as well as the scope of public enterprises, and show that they have a significant negative impact on the probability of a cross-border win.

Position auctions with dynamic resizing

This paper analyzes mechanisms for selling advertising inventory in a position auction in which displaying less than the maximal number of ads means the ads that are shown can be dynamically resized and displayed more prominently. I characterize the optimal mechanism with and without dynamic resizing, and illustrate how the optimal reserve prices in a Vickrey–Clarke–Groves mechanism vary with the amount of dynamic resizing and the number of bidders.

A Secure M + 1st Price Auction Protocol Based on Bit Slice Circuits

This paper presents an efficient secure auction protocol for M +1st price auction. In our proposed protocol, bidding prices are represented as binary numbers. Thus, when the bidding price is an integer up to p and the number of bidders is m, the complexity of our protocol is a polynomial of log p and m, while in previous secure M + 1st price auction protocols, the complexity is a polynomial of p and m. We apply the Boneh-Goh-Nissim encryption to the mix-and-match protocol to reduce the computation costs.

Improving the estimation of probability of bidder participation in procurement auctions

Anticipating the number and identity of bidders has significant influence in many theoretical results of the auction itself and bidders' bidding behaviour. This is because when a bidder knows in advance which specific bidders are likely competitors, this knowledge gives a company a head start when setting the bid price. However, despite these competitive implications, most previous studies have focused almost entirely on forecasting the number of bidders and only a few authors have dealt with the identity dimension qualitatively. Using a case study with immediate real-life applications, this paper develops a method for estimating every potential bidder's probability of participating in a future auction as a function of the tender economic size removing the bias caused by the contract size opportunities distribution. This way, a bidder or auctioner will be able to estimate the likelihood of a specific group of key, previously identified bidders in a future tender.

Identification and Estimation of Risk Aversion in First Price Auctions With Unobserved Auction Heterogeneity

We extent the point-identification result in Guerre, Perrigne, and Vuong (2009) to environments with one-dimensional unobserved auction heterogeneity. We also show a robustness result for the case where the exclusion restriction used for point identification is violated: We provide conditions to ensure that the primitives recovered under the violated exclusion restriction still bound the true primitives in this case. We propose a new Sieve Maximum Likelihood Estimator, show its consistency and illustrate its finite sample performance in a Monte Carlo experiment. We investigate the bias in risk aversion estimates if unobserved auction heterogeneity is ignored and explain why the sign of the bias depends on the correlation between the number of bidders and the unobserved auction heterogeneity. In an application to USFS timber auctions we find that the bidders are risk neutral, but we would reject risk neutrality without accounting for unobserved auction heterogeneity.

Design of Auction Parameters to Reduce the Effect of Collusion

Government departments are increasingly turning to auctions to procure goods and services. Collusion among bidders, however, reduces competition and raises winning bid prices. Since conventional collusion control measures based on the redesign of auction mechanisms are less effective in government procurement auctions, there is a need to devise control measures that decrease the effect of collusion. This article demonstrates how the principles of design of experiments can be applied in a system dynamics model to find the auction parameter values that substantially reduce the effect of collusion in government procurement auctions. This research makes a number of contributions. First, it develops a feedback-based dynamic mechanism of collusion in government procurement auctions. The mechanism proposes the winning bid price as being determined not by the total number of bidders but by the number of independent bidders. It defines each cartel as one independent bidder regardless of the number of bidders in the cartel. Second, the mechanism is tested by developing a system dynamics model to government auctions for procuring contracts for roadwork projects in India. Third, the principles of experimental design are applied to find the auction parameter values that ensure high bid participation and low winning price-to-reserve price ratios.

Analysis of the distribution of the number of bidders in construction contract auctions

The number of bidders, N, involved in a construction procurement auction is known to have an important effect on the value of the lowest bid and the mark-up applied by bidders. In practice, for example, it is important for a bidder to have a good estimate of N when bidding for a current contract. One approach, instigated by Friedman in 1956, is to make such an estimate by statistical analysis and modelling. Since then, however, finding a suitable model for N has been an enduring problem for researchers and, despite intensive research activity in the subsequent 30 years, little progress has been made, due principally to the absence of new ideas and perspectives. The debate is resumed by checking old assumptions, providing new evidence relating to concomitant variables and proposing a new model. In doing this and in order to ensure universality, a novel approach is developed and tested by using a unique set of 12 construction tender databases from four continents. This shows the new model provides a significant advancement on previous versions. Several new research questions are also posed and other approaches identified for future study.

Reserve Price Choices of Sellers in Laboratory First Price Auctions: The Role of Experience

This essay analyzes choices of sellers, each setting a reserve price in a laboratory first price auction with automated equilibrium bidding. Subjects are allowed to practice and gain experience prior to making a single payoff-relevant choice. We found behavior of more experienced sellers to be consistent with benchmark theory: average reserve price for these sellers was independent of the number of bidders in the market and equaled the predicted level. Less experienced sellers however deviated from the theoretical benchmark: on average, they tended to shade reserve price below the predicted level, and positively relate it to the number of bidders.