Shachat, Jason (2009): Procuring Commodities: Request for Quote or Reverse Auctions?
Download (315kB) | Preview
We examine the relative performances of reverse auctions and request for quotes in a simple commodity environment. Enterprises embarking on a reverse auction initiative often start with their commodity purchases. We conduct laboratory experiments and find that this is a poor starting point. Both the mean and variance of prices when sourcing through reverse auctions. With respect to the general investigation of auctions, the request for quote is the mirror image of a first price sealed bid auction and has the same symmetric Nash equilibrium. However, the request for quote allows identification of simple behavioral rules such as always bidding a percentage of your signal, which is indistinct from Nash equilibrium strategies in the sell auction counterpart. Consequently we estimate that one-fourth of the subjects follow a simple mark-up rule and approximately two-thirds follow a strategic Nash equilibrium strategy.
|Item Type:||MPRA Paper|
|Original Title:||Procuring Commodities: Request for Quote or Reverse Auctions?|
|Keywords:||Procurement, Auction, Experiment|
|Subjects:||C - Mathematical and Quantitative Methods > C9 - Design of Experiments > C92 - Laboratory, Group Behavior
D - Microeconomics > D4 - Market Structure and Pricing > D44 - Auctions
C - Mathematical and Quantitative Methods > C7 - Game Theory and Bargaining Theory > C72 - Noncooperative Games
|Depositing User:||Jason Shachat|
|Date Deposited:||15. Feb 2009 08:48|
|Last Modified:||22. Feb 2013 06:00|
An-Wen Chan, Asbjørn Hróbjartsson, Mette T. Haahr, Peter C. Gøtzsche, and Douglas G. Altman. "Empirical evidence for selective seporting of outcomes in randomized trials: comparison of protocols to published articles." The Journal of the American Medical Association 291 (May 2004): 2457-2465.
Cantillon, Estelle. "The effect of bidders' asymmetries on expected revenue in auctions." Games and Economic Behavior 62, no. 1 (January 2008): 1-25.
Chafkin, Max. "Reverse auctions: a survival guide." Inc. May 2007.
Chen-Ritzo, Ching Hua, Terry P. Harrison, Anthony M. Kwasnica, and Douglas J. Thomas. "Better, faster, cheaper: an experimental analysis of a multiattribute reverse auction mechanism with restricted information feedback." Management Science 51, no. 12 (December 2005): 1753-1762.
Coppinger, Vicki, Vernon L. Smith and John Titus. "Incentive and behavior in english, dutch, and sealed-bid auctions." Economic Inquiry 18 (January 1980): 1-22.
Cox, James C., Bruce Roberson, and Vernon L. Smith. "Theory and behavior of single object auctions." In Reseach in Experimental Economics, edited by Vernon L. Smith, 537-579. Greenwich: JAI Press, 1982.
Elmaghraby, Wedad. "Auctions within E-sourcing events." Production and Operations Management 16, no. 4 (August 2007): 409-422.
Filiz-Ozbay, Emel, and Erkut Y. Ozbay. "Auctions with anticipated regret: theory and experiment." American Economic Reveiw 97, no. 4 (September 2007): 1407-1418.
Graham, John R., Harvey, Campbell R. and Rajgopal, Shivaram. "The economic implications of corporate financial reporting." Journal of Accounting and Ecnomics 40 (December 2005): 3-73.
Guth, Werner, Radosveta Ivanova-Stenzla, and Elmar Wolfstetter. "Bidding behavior in asymmetric auctions: an experimental study." European Economic Review 49, no. 7 (October 2005): 1891-1913.
Haruvy, Ernan and Sandy D. Jap. "Interorganizational relationships and bidding behavior in industrial online reverse auctions." Journal of Marketing Research 45, no. 5 (2008): 550-561.
Haruvy, Ernan and Elena Katok. "An Experimental Investigation of Buyer Determined Procurement Auctions." Unpublished manuscript. Pennsylvania State University (2008).
Holt, Charles A. "Competitive bidding for contracts under alternative auction procedures." Journal of Politcial Economy, (88) 1980: 433-445.
Jap, Sandy D. "Online reverse auctions: Issues, themes, and prospects for the future." Journal of the Academy of Marketing Science 30, no. 4 (September 2002): 506-525.
Jap, Sandy D. "The impact of online reverse auction design on buyer-supplier relationships." Journal of Marketing 71, no. 1 (2007): 146-159.
Jap, Sandy D., and Naik Prasad. "BidAnalyzer: a method for estimation andsSelection of dynamic bidding models." Marketing Science 27, no. 6 (2008): 949-960.
Kagel, John H. and Dan Levin. "Auctions:experiments." In The New Palgrave Dictionary of Economics, edited by Steven N. Durlauf and Lawrence E. Blume. Palgrave McMillan, 2009.
Kinney, Sam. "RIP Fixed Pricing: The Internet is on its way to "marketizing everything"." Business Economics, April 2000: 39-44.
Krishner, Vijay. Auction Theory. London: Academic Press, 2002.
Ledyard, John O. "The scope of the hypothesis of Bayesian equilibrium." Journal of Economic Theory 39, no. 1 (June 1986): 59-82.
Maskin, Eric, and John G. Riley. "Asymmetric auctions." Review of Economic Studies 67, no. 3 (July 2000): 413-438.
Neugebauer, Tibor, and Reinhard Selten. "Individual behavior in first price auctions: the importance of informational feedback in computerized experimental markets." Games and Economic Behavior 54, no. 1 (January 2006): 183-204.
Parkes, David C., and Jayant Kalagnanam. "Models for Iterative Multiattribute Procurement Auctions." Management Science 51, no. 3 (March 2005): 435-451.
Paul, Milgrom, and Weber Robert. "A Theory of Auctions and Competitive Bidding." Econometrica 50 (1982): 1089-1122. Porter, Anne Millen. "E-Auction Playbook." Purchasing.com. 2001.
Shachat, Jason, and J. Todd Swarthout. Procurement Auctions for Differentiated Goods. Experimental Economics Center Working Paper Series, Georgia State University, 2006.
Stein, Andrew, Paul Hawking, and C. Wyld David. "The 20% Solution?:A case study on the efficacy of reverse auctions." Management Research News 26, no. 5 (2006): 1-20.
Vickrey, William. "Counterspeculation, Auctions , and Competitive Sealed Bid Tenders." Journal of Finance, 16 (1961): 8 -37.
Available Versions of this Item
- Procuring Commodities: Request for Quote or Reverse Auctions? (deposited 15. Feb 2009 08:48) [Currently Displayed]