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Entry and Bidding in Common and Private Value Auctions with an Unknown Number of Rivals

De Silva, Dakshina G. and Jeitschko, Thomas D. and Kosmopoulou, Georgia (2009) Entry and Bidding in Common and Private Value Auctions with an Unknown Number of Rivals. Review of Industrial Organization, 35 (1-2). pp. 73-93. ISSN 0889-938X

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    Abstract

    In many procurement auctions bidders do not know how many rivals they face at the time that they incur the cost of preparing their bids. We show in a theoretical model that regardless of whether the procurement is characterized by private or by common values an increase in the potential number of bidders may lead to higher procurement costs. This raises potential policy questions of whether and how entry should be encouraged or limited in public procurement auctions. We use evidence from auctions of construction contracts to estimate the effect of an increase in the pool of potential bidders on entry and auction prices when entry and bidding decisions are made sequentially with no knowledge of the number or identity of the actual competitors.

    Item Type: Article
    Journal or Publication Title: Review of Industrial Organization
    Uncontrolled Keywords: Auctions ; Entry ; Bid preparation costs ; Common values ; Endogenous entry ; Private values ; Procurement auctions
    Subjects: UNSPECIFIED
    Departments: Lancaster University Management School > Economics
    ID Code: 52462
    Deposited By: ep_importer_pure
    Deposited On: 08 Feb 2012 09:27
    Refereed?: Yes
    Published?: Published
    Last Modified: 09 Apr 2014 23:03
    Identification Number:
    URI: http://eprints.lancs.ac.uk/id/eprint/52462

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