Endogenous Asymmetry in a Dynamic Procurement Auction

Title:
Endogenous Asymmetry in a Dynamic Procurement Auction
Authors:
Saini, Viplav
Abstract:
We show how to numerically solve for a Markov-perfect equilibrium of a dynamic auction game where a procurer repeatedly purchases construction services from capacity-constrained firms. We find that the procurer is best off scheduling frequent auctions for small project sizes. Otherwise, firm capacity utilization rates become larger and more asymmetric, which softens competition and increases procurement costs. We also find that forward-looking bidding dampens the competition-softening effects of asymmetry: farsighted firms compete more intensely than myopic ones. This can undermine the goal of a bid-preference-style affirmative action program: more farsighted firms respond less to the asymmetry induced via bid preferences.
Citation:
Saini, Viplav. 2012. "Endogenous asymmetry in a dynamic procurement auction." RAND Journal of Economics 43(4): 726-760.
Publisher:
RAND
DATE ISSUED:
2012
Department:
Economics
Type:
article
PUBLISHED VERSION:
10.1111/1756-2171.12006
PERMANENT LINK:
http://hdl.handle.net/11282/309704

Full metadata record

DC FieldValue Language
dc.contributor.authorSaini, Viplaven_US
dc.date.accessioned2013-12-23T16:15:53Z-
dc.date.available2013-12-23T16:15:53Z-
dc.date.issued2012en
dc.identifier.citationSaini, Viplav. 2012. "Endogenous asymmetry in a dynamic procurement auction." RAND Journal of Economics 43(4): 726-760.en_US
dc.identifier.issn0741-6261en_US
dc.identifier.urihttp://hdl.handle.net/11282/309704-
dc.description.abstractWe show how to numerically solve for a Markov-perfect equilibrium of a dynamic auction game where a procurer repeatedly purchases construction services from capacity-constrained firms. We find that the procurer is best off scheduling frequent auctions for small project sizes. Otherwise, firm capacity utilization rates become larger and more asymmetric, which softens competition and increases procurement costs. We also find that forward-looking bidding dampens the competition-softening effects of asymmetry: farsighted firms compete more intensely than myopic ones. This can undermine the goal of a bid-preference-style affirmative action program: more farsighted firms respond less to the asymmetry induced via bid preferences.en_US
dc.language.isoen_USen_US
dc.publisherRANDen_US
dc.identifier.doi10.1111/1756-2171.12006-
dc.subject.departmentEconomicsen_US
dc.titleEndogenous Asymmetry in a Dynamic Procurement Auctionen_US
dc.typearticleen_US
dc.identifier.journalRAND Journal of Economicsen_US
dc.identifier.volume43en_US
dc.identifier.issue4en_US
dc.identifier.startpage726en_US
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