Shachat, Jason (2009): Procuring Commodities: First Price Sealed Bid or English Auction?
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I use laboratory experiments to examine the relative performance of the English auction (EA) and the first price sealed bid auction (FPA) when procuring a commodity. The mean and variance of prices are lower in the FPA than in the EA. Bids and prices in EA agree with game theoretic predictions while they don’t in the FPA. To resolve these deviations found in the FPA, I consider a mixture model with three bidding rules: constant absolute mark-up, constant percentage mark-up, and strategic best response. A dynamic specification is estimated as a hidden Markov model. Initially about three quarters of the subjects are strategic bidders, but over time the number of strategic bidders falls to below sixty-five percent. There is a corresponding growth in those who bid a constant absolute mark-up above realized cost. This model provides an explanation of the dynamics of the mean and variance of price.
|Item Type:||MPRA Paper|
|Original Title:||Procuring Commodities: First Price Sealed Bid or English Auction?|
|Keywords:||Procurement, Auction, Experiment, Hidden Markov Model|
|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:||28. May 2010 18:28|
|Last Modified:||12. Feb 2013 12:03|
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Available Versions of this Item
Procuring Commodities: Request for Quote or Reverse Auctions? (deposited 15. Feb 2009 08:48)
- Procuring Commodities: First Price Sealed Bid or English Auction? (deposited 28. May 2010 18:28) [Currently Displayed]