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Increasing Competition and the Winner's Curse: Evidence from Procurement
Han Hong,Matthew Shum +1 more
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The authors empirically measured the effects of increasing competition on equilibrium bidding in procurement auctions in common-value auctions and found that the winner's curse counsels more conservative bidding as the number of competitors increases.Abstract:
We empirically measure the effects of increasing competition on equilibrium bidding in procurement auctions In common-value auctions the winner's curse counsels more conservative bidding as the number of competitors increases First we estimate the structural parameters of an equilibrium bidding model and test for the importance of common-value components in bidders' preferences Second we use these estimates to calculate the effects of increasing competition on both individual bids as well as winning bids ie procurement costs We analyze bid data from construction procurement auctions run by the New Jersey transportation department Our results indicate that for a large subset of these auctions the median procurement cost rises as competition intensifies: increasing the number of bidders from 3 to 6 raises median procurement costs by about 15% In this setting then asymmetric information overturns the common economic wisdom that more competition is always desirableread more
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Bidding for Incomplete Contracts: An Empirical Analysis of Adaptation Costs
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Asymmetric Information, Adverse Selection and Online Disclosure: The Case of eBay Motors
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Nonparametric tests for common values at first-price sealed bid auctions
TL;DR: In this paper, the authors develop tests for common values at first-price sealed-bid auctions, which are based on the fact that the "winner's curse" arises only in common values auctions.
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Entry and competition effects in first-price auctions: theory and evidence from procurement auctions
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TL;DR: In this article, the authors study three competing procurement auction models with endogenous entry and propose structural models of entry and bidding corresponding to the three models under consideration, controlling for unobserved auction heterogeneity, and use the recently developed semi-parametric Bayesian estimation method to analyse the data.
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