Athias, Laure and Nunez, Antonio (2008): The more the merrier? Number of bidders, information dispersion, renegotiation and winner’s curse in toll road concessions.
Download (272kB) | Preview
We empirically assess the winner’s curse effect in auctions for toll road concessions. First, we investigate the overall winner’s curse effects on bidding behaviour. Second, we account for differing levels of common-value components. Third, we investigate whether the possibility of renegotiation affects the winner’s curse effect. Using a unique dataset of 49 concessions, we show that the winner’s curse effect is particularly strong, i.e. bidders bid less aggressively when they expect more competition. In addition, we observe that this effect is larger for projects where the common uncertainty is greater, and is dampened in weaker institutional frameworks, in which renegotiations are easier.
|Item Type:||MPRA Paper|
|Original Title:||The more the merrier? Number of bidders, information dispersion, renegotiation and winner’s curse in toll road concessions|
|Keywords:||Winner’s curse; Common value auction; Public Private Partnerships; incomplete contract|
|Subjects:||H - Public Economics > H5 - National Government Expenditures and Related Policies > H57 - Procurement
H - Public Economics > H5 - National Government Expenditures and Related Policies > H54 - Infrastructures; Other Public Investment and Capital Stock
L - Industrial Organization > L5 - Regulation and Industrial Policy > L51 - Economics of Regulation
H - Public Economics > H1 - Structure and Scope of Government > H11 - Structure, Scope, and Performance of Government
D - Microeconomics > D4 - Market Structure and Pricing > D44 - Auctions
D - Microeconomics > D8 - Information, Knowledge, and Uncertainty > D82 - Asymmetric and Private Information; Mechanism Design
|Depositing User:||Laure Athias|
|Date Deposited:||18. Sep 2008 11:26|
|Last Modified:||01. Mar 2013 03:15|
Aghion, P., Dewatripont, M., and Rey P., 1994. Renegotiation Design with Unverifiable Information. Lead article in Econometrica 62(2), 257-282.
Albers, W. and Harstad, R. M., 1991. Common-value auctions with independent information: a framing effect observed in a market game. In R. Selten, R. (Ed.). Game Equilibrium Models, vol. 2, Berlin: Springer-Verlag.
Athey S. and Haile, P.A., 2007. Nonparametric Approaches to Auctions. In Heckman, J. and Leamer, E. (Eds.). Handbook of Econometrics, Vol. 6, Elsevier.
Athias L. and Saussier, S., 2006. Contractual Design of Toll Adjustment Provisions in Infrastructure Concession Contracts. SSRN & ATOM Working Paper.
Athias L. and Saussier, S., 2007. Un Partenariat Public Privé rigide ou flexible ? Théorie et application aux concessions routières à péage. Revue Economique, 58 (3), 565-576.
Bajari P., McMillan, R. and Tadelis, S., 2003 Auctions versus Negotiations in Procurement: An Empirical Analysis. NBER Working Papers, 9757.
Baldwin R. and Cave, M., 1999. Franchising and its Limitations. In Understanding Regulation – Theory, Strategy and Practice. Oxford: Oxford University Press, pp. 257-285.
Bikhchandani, S. and Riley, J. G., 1991. Equilibria in open common value auctions. Journal of Economic Theory, 53, 101–30.
Boyce, D., 2007. Forecasting Travel on Congested Urban Transportation Networks: Review and Prospects for Network Equilibrium Models. Journal of Networks and Spatial Economics, Vol. 7 (2), pp. 99-128.
Brett, S., 1999. The Good/Leisure Tradeoff and the Value of Travel Time Savings. Road & Transport Research, September.
Bulow J., Huang, M. and Klemperer, P., 1996. Toeholds and Takeovers. Working Paper, Stanford University.
Bulow J. and Klemperer, P., 1996. Auctions versus Negotiations. American Economic Review, 86, 180-194.
Bulow J. and Klemperer, P., 2002. Prices and the winner's curse. RAND Journal of Economics, 33(1), 1-21.
Button, K.J.,1993. Transport Economics. 2nd edition. Edgar Elgar. 269p.
Bureau of Transport Economics, 1981. The Value of Travel Time Savings in Public Sector Evaluation. Australian Government Publishing Service, Canberra, September.
Calderon, C., Easterly, W. and Serven, L. (Eds), 2002. The Macroeconomics of Infrastructure in Latin America. The World Bank.
Calderon C. and Serven, L., 2002. The Output Cost of Latin America's Infrastructure Gag. In Calderon, C., Easterly, W. and Serven, L. (Eds). The Macroeconomics of Infrastructure in Latin America. The World Bank.
Canning, D., 1998. A Database of World Infrastructure Stocks, 1950-95. Policy Research Working Paper no 1929, The World Bank.
Cappen, E.C., Clapp, R.V. and Campbell, W.M., 1971. Competitive Bidding in High-Risk Situations. Journal of Petroleum Technology, 23, 641-653.
Chong, E., 2007. Collusion in auctions and contractual length: A theoretical analysis with an application to the French water sector. Working Paper.
Compte, O., 2002. The Winner’s Curse with Independent Private Values. Working Paper.
Dasgupta, S. and Spulber, F., 1990. Managing Procurement Auctions, Information Economics and Policy, 4, 5-29.
Demsetz, H., 1968. Why Regulate Utilities? Journal of Law and Economics, Vol.11.
De Silva, D.G., Dunne, T., Kankanamge, A. and Kosmopoulou, G., 2005. The Impact of Public Information on Bidding in Highway Procurement Auctions. Working Paper.
Engel E., Fisher R. and Galetovic A., 1997. Highway Franchising: Pitfalls and Opportunities. American Economic Review, 87, 68-72.
Engel E., Fisher R. and Galetovic A.,2002. Competition In or For the Field: Which is Better? Cowles Foundation Discussion Paper N°. 1358.
Engel E., Fisher R. and Galetovic A., 2003. Privatizing Highways in Latin America: Fixing What Went Wrong?. Economia, The Journal of LACEA, 4, 129-158.
Engel E., Fisher R. and Galetovic A., 2006a. Privatizing Highways in the United States, Review of Industrial Organization, 29, 27-53.
Engel E., Fisher R. and Galetovic A., 2006b. Renegotiation Without Holdup: Anticipating Spending and Infrastructure Concessions, Cowles Foundation Discussion Paper 1567.
Engel E., Fisher R. and Galetovic A., 2007. The Basic Public Finance of Public-Private Partnerships, Working Paper.
Ehrman C.M. and Shugan, S. M., 1995. The Forecaster’s Dilemma. Marketing Science, Vol. 24. No 2. pp 123-147.
Estache, A., 2001. Privatization and Regulation of Transport Infrastructure in the 1990s: Successes and Bugs to Fix for the next Millennium. The World Bank Research Observer, vol. 16, no. 1, pp. 85-107.
Estache A., 2006. PPI partnerships vs. PPI divorces in LDCs. Review of Industrial Organization, 29, 3-26.
Flyvbjerg, B., 2005. Measuring Inaccuracy in Travel Demand Forecasting: Methodological Considerations Regarding Ramp Up and Sampling. Transportation Research A, vol. 39, no. 6, July 2005, pp. 522-530.
Flyvbjerg, B., Bruzelius, N. and Rothengatter, W., 2003. Megaprojects and Risk – An Anatomy of Ambition. Cambridge: Cambridge University Press, 207p.
Flyvbjerg, B., Skamris, M. and Buhl, S.L., 2002. Underestimating Costs in Public Works Projects: Error or Lie?. Journal of the American Planning Association, 68, 279-95.
Gomez-Ibanez, J.A. and Meyer, J. R., 1993. Going Private: The International Experience with Transport Privatization. The Brookings Institution, Washington, D.C.
Gomez-Lobo, A. and Szymanski, S., 2001. A Law of Large Numbers: Bidding and Compulsory Competitive Tendering for Refuse Collection Contracts. Review of Industrial Organization 18: 105-113.
Goeree, J. K. and Offerman, T., 2003. Competitive Bidding in Auctions with Private and Common Values. Economic Journal, 113(489): 598-613.
Guasch, J.L., 2004. Granting and Renegotiating Infrastructure Concessions: Doing it Right. World Bank Institute.
Guasch, J.L, Laffont, J.J. and Straub, S., 2003. Renegotiation of Concession Contracts in Latin America, forthcoming in International Journal of Industrial Organisation.
Guasch, J.L, Laffont, J.J. and Straub, S., 2005. Concessions of Infrastructure in Latin America: Government-led Renegotiation, forthcoming in Journal of Applied Econometrics.
Haile, P.A., Hong, H. and Shum, M., 2003. Nonparametric Tests for Common Values at First- Price Sealed-Bid Auctions. NBER Working Papers 10105.
Hart, O.D., 1995. Firms, Contracts, and Financial Structure. Oxford and New York: Oxford University Press, Clarendon Press.
Hendricks, K., Pinkse, J. and Porter, R.H., 2003. Empirical Implications of Equilibrium Bidding in First-Price, Symmetric, Common Value Auctions. Review of Economic Studies 70, 115-145.
Hensher, D.A., 1976. The Value of Commuter Travel Time Savings. Empirical Estimation Using an Alternative Valuation Method. Journal of Transport Economics and Policy 10 (2), pp. 167-176.
Hensher, D.A. and Goodwin, P., 2004. Using values of travel time savings for toll roads: avoiding some common errors. Transport Policy 11. pp 171-181.
Hensher D.A. and Greene, W.H., 2003. The Mixed Logit Model: The State of Practice. Transportation 30. 133-176.
Hong H., and Shum, M., 2002. Increasing Competition and the Winner's Curse: Evidence from Procurement. Review of Economic Studies 69 (4), 871-898.
Jofre-Bonet, M. and Pesendorfer, M., 2003. Estimation of a Dynamic Auction Game. Econometrica, Vol.71, No. 5. pp. 1443-1489.
Kagel J. and Levin, D., 1986. The Winner’s Curse and Public Information in Common Value Auctions. American Economic Review, 76, 894-920.
Kagel J., Levin, D., Battalio, R. and Meyer, D.J., 1989. First-price common value auctions: Bidder behaviour and the winner’s curse. Economic Inquiry 27: 241-258.
Kaufmann, D., Kraay, A. and Mastruzzi, M., 2004. Governance Matters III: Governance Indicators for 1996, 1998, 2000, and 2002. World Bank Economic Review, 18, 253-287.
Klein, M., 1998. Bidding For Concessions. World Bank Policy Research Working Paper No. 1957.
Klemperer, P. D., 1998. Auctions with almost common values. European Economic Review, 42, 757–69.
Krishna, V. and Morgan, J., 1997. (Anti-) competitive effects of joint bidding and bidder restrictions. Working Paper 184, Penn State University and Princeton University.
La Porta, R., Shleifer, A., Vishny, R.W. and Lopez de Silanes, F., 1998. Law and Finance. Journal of Political Economy, 106(6).
Laffont, J.J., 1997. Game Theory and Empirical Economics: The Case of Auction Data. European Economic Review, 41, 1-35.
Laffont, J.J., 2005 Regulation and Development. Collection Frederico Caffe Lectures, Cambridge University Press.
Martimort, D. and Straub, S., 2006. Privatization and Changes in Corruption Patterns: The Roots of Public Discontent. Mimeo.
Milgrom, P., 1989. Auctions and Bidding: A Primer. The Journal of Economic Perspectives, Vol. 3, No. 3., pp. 3-22.
Milgrom, P. and Weber, R., 1982. A Theory of Auctions and Competitive Bidding. Econometrica, Vol. 50, No. 5., pp. 1089-1122.
Nunez, A., 2007. Sources of Errors and Biases in Traffic Forecast for Toll Road Concessions. Ph.D. Dissertation. University of Lyon.
Nunez, A., 2008. A Survey on Transport Forecasters’ Behaviour. Working Paper.
Odeck, J., 2004. Cost Overruns in Road construction – What Are their Sizes and Determinants?, Transport Policy, 11(1), 43-53.
Pickrell, D., 1990. Urban Rail Transit Projects: Forecasts Versus Actual Ridership and Cost. Washington, D.C.. Department of Transportation.
Pinkse, J. and Tan, G., 2000. Fewer Bidders can Increase Price in First-Price Auctions with Affiliated Private Values. Mimeo.
Porter, R.H. and Zona, J.D., 2003. Detection of Bid Rigging in Procurement Auctions. The Journal of Political Economy, Vol. 101, No. 3, 518-538.
Quinet, E., 1998. Principes d’Economie des Transports. Economica. 419p.
Schafer, A., 2000. Regularities in Travel Demand: An International Perspective. Journal of Transportation and Statistics, Vol. 3, No. 3.
Shapiro, S.S. and Wilk, M.B., 1965. An Analysis of Variance Test for Normality”, Biometrika, 52(3-4), 591-611.
Skamris M.K. and Flyberg, B., 1997. Inaccuracy of traffic forecasts and costs estimates on large transport projects. Transport Policy 4 (3), 141–146.
Standard & Poor's, 2002. Traffic Forecasting Risk in Start-Up Toll Facilities. London: Standard & Poor's.
Standard & Poor's, 2004. Traffic Forecasting Risk: Study Update 2004. London: Standard & Poor's.
Standard & Poor's, 2005. Traffic Forecasting Risk Study Update 2004 – Through Ramp-up and Beyond. London: Standard & Poor's.
Trujillo L., Quinet, E. and Estache, A., 2002. Dealing with demand forecast games in transport privatization. Transport Policy 9. pp. 325-334.
Yin P.L., 2005. Information Dispersion and Auction Prices. Working Paper.
Williamson, O.E., 1976. Franchise Bidding for Natural Monopolies. In General and with Respect to CATV. Bell Journal of Economics, 7, 73-104.
World Bank, 2006. World Development Indications 2006. World Bank. Retrieved April 18, 2006 from http://devdata.worldbank.org/wdi2006/contents/index2.htm.
Available Versions of this Item
- The more the merrier? Number of bidders, information dispersion, renegotiation and winner’s curse in toll road concessions. (deposited 18. Sep 2008 11:26) [Currently Displayed]