Showing papers on "Bidding published in 1979"

A Decentralized Method for Utility Regulation

Abstract: A new institutional arrangement for regulating utilities is suggested that minimizes the costs of natural monopolies. A mixture of regulation and franchising, the plan draws on the advantages of each and eliminates many of the problems. The proposal allows utilities to set their own price on the basis of demand and marginal-cost projections. Subsidies are provided by the regulatory agency if there is a consumer surplus. The system encourages the utility to select a competitive price and to produce only the amount of service needed. Operating efficiency is encouraged by rewarding cost reductions and discouraging cost overstatement at the rate review. The regulatory agency would not need to take action to bring price and marginal costs into equality. The franchise sale can be made by competitive bidding, in which the bidders would capitalize part or all of the subsidy or the regulatory agency could recover the subsidy in a lump-sum tax on the utility.

A convergence theorem for competitive bidding with differential information

Abstract: IN THIS PAPER we investigate the properties of the winning bid in a sealed bid tender auction where each player has private information. We find that it is possible for the winning bid to converge in probability to the true value of the object at auction, even though no bidder knows the true value. Necessary and sufficient conditions for this phenomenon are derived, extending and generalizing certain of Wilson's results [3]. We study an auction in which a seller offers to sell at the highest bid an item of unknown value V. The kth bidder receives a private signal Sk (for k = 1, 2,.. .) and submits a bid without knowledge of the other signals. A finitely additive probability measure P reflects the bidders' unanimous beliefs about V and the signals. Conditional on V, the signals are independent and identically distributed. The signals take their values in some space &'. With n bidders, a bidding strategy for k is a function Pnk: 9' -> R. k's strategy specifies that upon receiving the signal Sk, he shall bid Pnk(Sk).2 Thus the winning

Auctions and Bidding Models: A Survey,

Abstract: : Auctions and bidding models are attracting an ever increasing amount of attention. The Stark and Rothkopf bibliography includes approximately 500 works on the subject; additional works have appeared since the bibliography was compiled. This paper presents a general framework for classifying and describing various auctions and bidding models, and surveys the major results of the literature in terms of this framework. (Author)

Note---Competitive Bidding with Asymmetric Information Reanalyzed

Abstract: This note reanalyzes the following problem, formerly treated by Wilson Wilson, R. B. 1967. Competitive bidding with asymmetric information. Management Sci.13 July 816--820: two parties have to submit bids for an object One of them knows the value with certainty, the other does not. The equilibrium derived differs from Wilson's solution and yields a simple explanation for the case cited by Wilson: the value of the game is essentially zero for the party with incomplete information.

Some Evidence of the Efficiency of a Speculative Market

Abstract: It is well known that the returns on various betting opportunities at a racetrack are determined by a competitive bidding of the bettors in a natural environment of their decision making. In this paper, two simple bets of unknown but identical winning probabilities are identified. An analysis of 1,089 observations shows the data are consistent with the hypothesis that both bets are identically priced, an implication of an efficient speculative market.

An analysis of alternative bidding systems for leasing offshore oil

Abstract: This study utilizes a formal model of competitive bidding to analyze some alternative procedures for selling offshore oil leases. We assume that the popu? lation of leases to be sold contains tracts having both positive and negative true values and that firms are able to obtain informative, but highly uncertain, estimates ofthe true value of each tract. We derive firms' Nash equilibrium bidding strategies for bonus, profit-share, and a form of royalty bidding and then analyze the expected division of economic rent between buyer and seller for the three bidding systems.

Comparison of Friedman and Gates Competitive Bidding Models

Abstract: The Gates-Friedman controversy is reviewed. An example of the application of each probability assessment model is presented. Monte Carlo simulation procedures used to evaluate the effectiveness of both models when applied to a contractor's 3-yr bidding history are described. The following conclusions are made: (1)Friedman's model always gives a lower optimal bid and a smaller probability of winning at optimality than does Gates'; (2)on the average, Friedman's model results in slightly hgher long-range profits than does Gates' but it obtains almost twice as much work; and (3)on the average, the relative frequency of successful bids corresponds more closely to the probability of winning at optimality found by the Gates model than by the Friedman model.

Negotiated Municipal Bond Underwritings: Implications for Efficiency: Note

Abstract: Recent empirical research has demonstrated that increased bidder competition lowers borrowing costs for issuers of municipal bonds [4, 5, 7, 12, 13, 14]. Consequently, the accepted position of many economists is that new issues should be offered by competitive bid. However, this conclusion is unwarranted in the case of lower-quality bonds receiving only one or two bids. The purpose of this paper is to investigate the economic consequences of municipalities selling bonds by negotiation. More specifically, it investigates the hypothesis that in instances when issuers face relatively high demand uncertainty for their new bonds, it is potentially more efficient to sell bonds by negotiation than by competitive bidding. It is shown that, for lower rated bonds having only one or two bids, cost savings are possible by using negotiation.

Comparative Costs of Competitive and Negotiated Underwritings in the State and Local Bond Market

Abstract: COMPETITIVE BIDDING RATHER THAN sale by negotiation is the most frequent method of underwriting state and local government bonds. Generally, it is believed that the competition inherent in competitive bidding lowers municipal borrowing costs and provides some protection against connivance on the part of public officials. In recent years, however, the dramatic increase in volume of negotiated sales has rekindled a long-standing controversy in the municipal bond market over which underwriting procedure is least costly to the issuer. This paper examines empirically the comparative costs of competitive and negotiated underwriting arrangements in the municipal bond market in order to document the effects of underwriter procedure on net interest cost, underwriter spread, and reoffering yield. Additionally, attention is given to the role of issue size in determining competitive and negotiated underwriting costs.

The Efficient Diversification of Bids in Treasury Bill Auctions

Abstract: IN selling bills, the U.S. Treasury employs a discriminatory auction. The Treasury awards bills in the amounts and at the prices bid, beginning with the highest price and proceeding to consecutively lower prices, until the issue is allotted. A common practice -of bidders in the weekly auctions is to "strip-bid"; that is, to bid approximately equal amounts around the anticipated stop-out price, the lowest price at which bills are awarded. Although a number of writers have evaluated the revenue generating capabilities of the discriminatory auction, only one, Vernon Smith, attempted to do so ,through the specification of a utility maximizing model of the bidding decision.' Despite the prevalence of multiple price bidding in practice, however, Smith posited the selection of a single price bid. This paper examines the theoretical and empirical aspects of the multiple price bid in Treasury bill auctions. Section I briefly describes the weekly auctions. Section II presents a model of the bidding decision which shows that, in general, multiple price bids are optimal. Multiple price bids are examined empirically in section III. Bids that are efficient in a mean-variance sense are derived from the forecasts of actual bidders.2 In a comparison covering 75 auctions, the efficient bids had higher mean profit and lower standard deviations of profit than the dealers' actual bids on an ex post as well as ex ante basis.

Auction markets, bid preparation costs, and entrance fees

Abstract: Ways are examined to reduce the social cost of overinvesting in offshore-petroleum lease-site information because of the auction procedure. Cost assessment is used to illustrate the effect of entrance fees as a disincentive to market entry. Although there is some social gain in using the bidding process to establish the highest-value user, the gain is more than offset and returns to the seller increase when bidders dissipate value while they are estimating development costs. The trend for the private sector to replace auction bidding with other sales techniques reflects these findings. 8 references.

The Effect of Unemployment Insurance on Seasonal Fluctuations in Employment

Abstract: THE possible stabilizing effects of unemployment insurance (UI) have been of interest to policy makers ever since the pioneer Wisconsin unemployment compensation law was enacted in 1932. At the bidding of Phillip LaFollette, then a gubernatorial candidate, that act was drawn up "with maximum emphasis on steadier jobs."' Later, when President Franklin Roosevelt called for UL to be included as part of the

A Decentralized Method for Utility Regulation: A Comment

Abstract: The author comments on the article by Loeb and Magat in this journal issue (P 399); he feels their idea is worthy of more-detailed examination on an industry-specific level. He confines his comments, however, to a more-general comparison of the Loeb-Magat (L-M) scheme, traditional rate-of-return regulation, and pure franchise bidding. The basic L-M proposal consists of two parts. First it is shown that if a utility is subsidized by an amount corresponding to total consumer surplus, then it will have the incentive to pursue cost-minimizing behavior and to set its price equal to the marginal cost of production. Mr. Sharkey believes that this pure subsidy scheme would be wholly unworkable in practice. The second part of the L-M proposal consists of the subsidy scheme combined with either franchise bidding or a lump-sum tax. Mr. Sharkey feels that this proposal has considerable merit if conditions exist such that the net subsidy paid to the utility is sufficiently small; net subsidy is defined as the excess of the actual subsidy plus revenues of the firm over the total cost of production. Thus, the net subsidy is the excess profit the utility receives compared to a utility perfectly regulated by traditional means. Mr.more » Sharkey elaborates on some of his objections to the L-M proposal for cases in which the net subsidy is large. Then, he briefly considers the characteristics of a natural monopoly market which could potentially be regulated by a combined subsidy-franchise-tax scheme.« less

The Economics of the Television Market for Theatrical Movies

Abstract: The new bargaining strategy of network bidding for feature films before their theatrical release is a logical extension of the networks' activities in the regular TV programming market.

Government Contracts in a Nutshell

Abstract: The Federal Acquisition Regulation (FAR) System; Improper Practices and Conflicts of Interest; Competition Requirements; Make or Buy; Contractor Qualifications; Market Research; Commercial Items; Simplified Procedures; Sealed Bidding; Negotiation; Types of Contracts; Special Methods; Small Business; Labor Laws; Environment; Privacy and Freedom of Information; Foreign Acquisition; Patents and Copyrights; Bonds and Insurance; Taxes; Cost Accounting Standards; Contract Cost Principles; Financing; Protest and Disputes; Major Systems; Research and Development; Construction and A-E Contracts; Service Contracting; Federal Supply; Utilities; Modifications; Subcontracting; Government Property; Quality Assurance; Transportation; Value Engineering; Termination; Extraordinary Actions; Government Sources; Clauses and Forms.

The Outer Continental Shelf Lands Act Amendments of 1978

Abstract: The Outer Continental Shelf Lands Act, designed to give the Federal government power to regulate mineral lease grants on the Outer Continental Shelf (OCS), was amended in 1978 to limit the Secretary of the Interior's power in response to pressure from consumer and environmental activists and from politicians and governors of the coastal states. An economic analysis of the impact these amendments will have follows an historical review of the bidding procedures for oil and gas lease sales and a description of the new bidding system. Replacing the traditional cash bonus bid with a fixed royalty with new systems is concluded to be slower and less efficient. The new systems not only increase operating costs by requiring more reporting, but increase uncertainties at the point of bidding. The cost will be passed on to the public as either lower government services or higher taxes. (DCK)

Correction of Bidding Errors: The Belgian Solution

Abstract: On the basis of data banks, a statistical method has been developed to calculate: (1)The minimum error total price, which is the price that includes the smallest error with regard to the technical aspect of the project, as well as the appreciation of the economic situation in the field of public bidding; and (2)the total price under which the bidder, under normal conditions, could not achieve the work without running important financial risks, or in other words, the price under which the bidder’s competitive behavior can no longer be considered to be normal. A special procedure enables contractors, members of a cooperation agreement, to partially correct their calculated price before putting in a bid. This procedure is conceived in order to maintain competition between bidders. The cooperation agreement has been notified to the European Community’s anti-trust department.

A knowledge-based system for locating missing high cards in bridge

Abstract: A knowledge-driven system for locating missing Bridge honours in closed hands is described. The program is Intended to follow the development given in an expert-level book. Although It is Incomplete, being as yet confined largely to reasoning from the bidding and opening leads, Its performance to date is promising. In roughly the first half of the book, It is able to replicate the conclusions about card location in more than eighty percent of the cases studied. The paper describes the three principal sections of the current program which deal with the analysis of the bidding, understanding the opening lead, and the 'Inference engine' respectively.

On the Non-Existence of Multiplicative Equilibrium Bidding Strategies,

Abstract: : Extensive use has been made of multiplicative bidding strategies in the literature relating to auctions of mineral leases. It is shown that, generally, multiplicative strategies are not in equilibrium. It is also established that an equilibrium bidding strategy is not a function merely of a sufficient statistic for the true value, or of any other of a class of related statistics, if an individual bidder observes more than one piece of information. The general insufficiency of a single simple statistic is briefly discussed and a special class of models is identified in which a single simple statistic is indeed strategically sufficient. (Author)

KIBITZ: the design of a bridge-bidding program utilizing simulated human judgement

Abstract: The design of a program utilizing simulated human judgement to bid bridge hands is presented. The program is a new application of a technique developed by Peter G. Ossorio and H. Joel Jeffrey, which transforms a body of expert judgements into orthogonal matrices referred to as "judgement spaces". The process by which the bids are produced is compared to the operation of a finite state machine: the states reflect the condition of the auction, the bids themselves move the machine from one state to the other, and the characteristics of the bridge hands -- as perceived by the experts -- control the state-to-state transitions. A description of the mechanics of bridge bidding is appended.

Electricity and Natural Gas Rate Issues

Abstract: Marginal-cost pricing for gas and electric utilities has been accepted after years of debate, but its present form of implementation does not resolve the problem of whether the individual consumer or the utility will control load management decisions. The authors examine issues surrounding time-of-use pricing versus load management, the determination of marginal capacity costs by relative loss-of-load probability (LOLP), the determination of marginal costs of transmission and distribution facilities, and how to bridge the transition from flat rates to voluntary time-of-use rates for residential customers. They feel the revenue requirements issue will become pressing as utilities need capital for future construction. The economics of lifeline rates, auction bidding, and other schemes are weighed against their potential for energy and resource conservation.