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:
Journal Article
Journal or Publication Title:
Review of Industrial Organization
Uncontrolled Keywords:
/dk/atira/pure/subjectarea/asjc/1400/1405
Subjects:
ID Code:
52462
Deposited By:
Deposited On:
08 Feb 2012 09:27
Refereed?:
Yes
Published?:
Published
Last Modified:
05 Jun 2020 01:06