Showing papers on "Bidding published in 1981"

Rational Expectations, Information Acquisition, and Competitive Bidding

Abstract: Most rational expectations market equilibrium models are not models of price formation, and naive mechanisms leading to such equilibria can be severely manipulable. In this paper, a bidding model is developed which has the market-like features that bidders act as price takers and that prices convey information. Higher equilibrium prices convey more favorable information about the quality of the objects being sold than do lower prices. Bidders can benefit from trading only if they have a transactions motive or if they have access to inside information. Apart from exceptional cases, prices are not fully revealing. A two stage model is developed in which bidders may acquire information at a cost before bidding and for which the equilibrium price is fully revealing, resolving a well-known paradox.

Valuing environmental commodities: some recent experiments

Abstract: A general model of consumer behavior is proposed to assess six recent experiments that have attempted to reveal preferences for environmental goals. Each experiment used a mix of both the techniques and the theory of demand for non-market commodities, and each was designed to estimate a non-market attitude associated with the environment and to analyze potential biases in the techniques. The six cases show some consistency in results. The linkage within the contingent market between the environmental attribute, institutional setting, and the bidding instrument must be realistic and accepted by the respondent to avoid biased results. Possibly the most-important result is the replication of results using a traditional property-value study and a contingent bidding approach. All evidence obtained to date suggests that hedonic studies of property values or wages, travel costs, and survey techniques all yield values well one order of magnitude in accuracy. 41 references, 2 tables.

The Competitive Effect in Bonus Bidding: New Evidence

Abstract: One of the major unsettled questions in the study of competitive bidding concerns the impact of additional competition in auctions on the optimal bid levels of competing firms. Numerous theoretical and simulation studies suggest an inverse relationship between the expected number of competitors and the bid level of a particular firm in sealed bid auctions involving objects of uncertain value. The few empirical studies that have been done contradict this assertion. In this article, we address this issue by pointing out a serious statistical defect in previous empirical work and by reestimating a bid level equation by using a more appropriate technique. New evidence is provided which reconciles the differences between previous empirical results and the major predictions of the widely accepted bidding theory models. The new results presented here support the conclusions of the theoretical studies.

Predicting Outcomes of Cash Tender Offers

Abstract: this question. Recent research suggests that the cash tender offer is an important element in the marketplace for corporate control and that tender offers promote the efficient utilization of corporate resources (Kummer and Hoffmeister [9] and Bradley [5]). That is, successful takeovers using cash tender offers have generally led to increased wealth for shareholders of both the bidding firm and the target firm. Much of the published research to date is written

Non-aggressive bidding behavior and the "winner's curse"

Abstract: Previous authors have noted a curious result that arises within the context of sealed-bid auctions: in certain situations it is in the bidder's interest to respond non-aggressively to increased competition. We consider a decision-theoretic formulation of the bidder's problem, and derive necessary conditions for the choice of a non-aggressive bidding strategy. The resulting conditions relate closely to a phenomenon that has been described rather loosely by bidding practitioners as the “winner's curse.’ In the course of this paper we develop a specific definition of the winner's curse, and demonstrate how it affects the firm's competitive behavior.

Negotiated versus Competitive Underwritings of Public Utility Bonds: Just One More Time

Abstract: Over the past decade, a number of papers [1, 2, 3, 6, 7, 9] have explored the relative merits of negotiation versus competitive bidding in the underwriting of corporate bonds, particularly bonds issued by public utilities. Interest in this subject has been stimulated principally by an important public policy issue—namely, the SEC's posture vis a vis its Rule U–50. Originally promulgated in 1940, this rule required competitive bidding on certain classes of utility bonds. In 1974, however, it was “temporarily” suspended on the grounds that chaotic conditions in the market for these securities called for more flexibility in the way issues could be underwritten. While this suspension continues in effect, Rule U–50 could be reinstated at any time by the SEC.

The Proto-History of Franchise Bidding*

Abstract: Competition-as actual behavior rather than theoretic formalism-finds its meaning in the notion of rivalry, but intellectual history holds two distinct notions of economic rivalry, each aligned with a different structure of property rights. The most common, non-technical use of the term "competition" describes a contest between two or more parties to achieve the same prize, e.g. economic profits. The contest is open to all rivals in the sense that each has equal access to the relevant economic markets. This requires a structure of property rights that permits ownership to be atomistic, decentralized, and participatory, which in turn allows every seller an equal right to serve customers and every buyer the freedom to choose those goods he wants. It is this wide freedom of action that characterized the competitive "model" of Adam Smith, who gave the paradigm outlined above its most forceful early expression. In this market system moreover, legal institutions generally uphold property rights in commodities traded as long as they are acquired in good faith without fraud or force. Another kind of rivalry is described by the contest to obtain an exclusive right to serve. The rivalry described by this form of competition is temporary and discontinuous, as compared to the continuous and quasi-perpetual rivalry of open competition. It usually takes the form of competitive bidding to secure a franchise, the monopoly status of which is subsequently sustained by force of law. In this case, the State is the lawful repository of the property right it franchises. Under properly designed contractual safeguards, franchise bidding may result in the manufacture and sale of goods at minimum average total costs of production.' But it will not pass the full test of economic efficiency, where price equals marginal

Grundbegriffe der Wahrscheinlichkeitsrechnung und statistischen Methodenlehre.

Abstract: 1 Introduction.- 1.1 Motivation.- 1.2 Environment and Aim of the Thesis.- 1.3 Contribution of the Thesis.- 1.4 Organization of the Thesis.- I Background.- 2 Theories.- 2.1 Axiomatic Models of Bargaining.- 2.1.1 The Basic Model.- 2.1.2 Literature on 2-Person Bargaining.- 2.1.3 Solution Concepts.- 2.1.4 A Note on the Strategic Approach to Bargaining.- 2.2 Auctions.- 2.2.1 Terminology.- 2.2.2 Literature on Auctions.- 2.2.3 Solution Concepts.- 2.2.4 Theoretical Models.- 2.2.5 Revenue, Efficiency, and Collusion in Private Value Auctions.- 2.2.6 Combinatorial Auctions.- 2.3 The Marriage Problem.- 2.3.1 Stability.- 2.3.2 Matching Procedures or Who-Proposes-to-Whom.- 2.3.3 Reporting Preferences.- 3 Internet-Based Freight Marketplaces.- 3.1 A Classification Scheme.- 3.1.1 Participants.- 3.1.2 Traded Goods.- 3.1.3 Trade.- 3.2 A Critical Analysis.- 3.2.1 The Blackboard Teleroute.- 3.2.2 The Auction House Benelog.- 3.2.3 The Exchange Eulox.- 3.2.4 Conclusion.- II Freight Auctions.- 4 Conventional Freight Auctions.- 4.1 Markets Considered.- 4.2 Empty Lanes.- 4.2.1 Standard Auctions & Cost Calculation.- 4.2.2 Combinatorial Auctions - No Solution to Spot Markets.- 4.3 Packagewize Placements.- 4.3.1 Imbalanced Flows of Goods.- 4.3.2 Monotony, Pareto-Optimality, and Reserve Prices.- 4.4 Conclusion.- 5 Dynamic Alliance Auctions.- 5.1 Stages of an Appropriate Mechanism.- 5.2 How Dynamic Alliance Auctions Work.- 5.2.1 The Basic Procedure.- 5.2.2 General Notation and Terms.- 5.2.3 The Rules of Dynamic Alliance Auctions.- 5.2.4 An Illustrative Example.- III Evaluation.- 6 Stages and Price Division.- 6.1 A Trade-off for Shippers.- 6.2 Collection Stage.- 6.3 Aggregation Stage.- 6.4 Placement Stage.- 6.5 Division of the Package Price.- 6.5.1 Axioms Satisfied.- 6.5.2 Nash and Kalai-Smorodinsky.- 6.5.3 An Appropriate Weight.- 6.6 Summary.- 7 Efficiency, Payoff, and Bids.- 7.1 Why Investigate Efficiency, Payoff, and Bids.- 7.2 Paul.- 7.3 Polar Cases.- 7.3.1 Perfectly Balanced Flows.- 7.3.2 Perfectly Imbalanced Flows.- 7.4 Expected Payoff.- 7.4.1 If 1,51 and IS'I Are Common Knowledge.- 7.4.2 If Only the Total Number of Bidders is Common Knowledge.- 7.4.3 If the Number of Bidders is Unknown.- 7.4.4 Maximizing Payoff.- 7.5 Polar Case Equilibria and Intuitive Bidding Strategies.- 7.5.1 Breakdown of the Polar Case Equilibria.- 7.5.2 Intuition & Ad-hoc Strategies.- 7.6 Summary.- 8 Experiment.- 8.1 Experimental Design.- 8.1.1 Procedure.- 8.1.2 Information.- 8.1.3 General Remarks.- 8.2 Experimental Results.- 8.2.1 Average Payoffs and Revenue Efficiency.- 8.2.2 Bid-to-Value Ratios.- 8.2.3 Bids in T1 and T2: Intuition Revisited.- 8.2.4 Summary.- 9 Putting Insights to Practice.- A Proofs.- B Formulas.- B.1 Expected Payoff.- C Experiment.- C.1 Translated Instructions.- List of Figures.- List of Tables.- References.

Implementing a Bidding Model

Abstract: A major British construction company spent 4 years developing, experimenting, evolving and implementing a probabilistic bidding model. This paper chronicles the progress and describes the results achieved. Over the course of the project the model evolved from a simple algorithm into a sophisticated tool for corporate planning.

Minimizing Net Interest Cost in Municipal Bond Bidding

Abstract: The problem of minimizing net interest cost (NIC) on new issues of tax-exempt debt securities is formulated as an integer linear programming problem. The formulation (for one variant) is a p-median problem with one additional constraint. Other variants are also closely related to the p-median problem. A dual ascent procedure for solving this problem class is presented and is incorporated in a branch and bound algorithm. Computational results are presented for a number of real world problems.

On the Estimation of Bid Distributions in Real Estate Markets

Abstract: The price at which a real property is sold depends on the initial asking price, the distribution of potential bids for the property by interested buyers, the quality and intensity of the advertising message, and the manner in which the initial asking price is revised if the property is not immediately sold. The model of real estate transactions developed in this paper shows that-contrary perhaps to current views-there is no simple relationship between selling prices and the distribution of potential bids. However, under certain conditions, estimates of the distribution of potential bids for any property can be obtained on the basis of a sample of past transactions, recording the asking price, selling price, and the physical characteristics of the properties sold.

Information and Bidding Behavior by Major Oil Companies for Outer Continental Shelf Leases: Is the joint Bidding Ban Justified?

Abstract: The Gaskins and Vann (G and V) hypothesis assumes that information gained during joint-bidding negotiations is used to increase the chances of winning on other OCS lease tracts. A review of the G and V model concludes that it lacks empirical content and finds all competition to be equal. The trend of legislative and administrative events that began with the joint bidding ban continues with various unconventional techniques, such as royalty bidding and fixed-net profit share bidding. To the extent that these unconventional systems are meant to be mechanisms for correcting anticompetitive bidding abuses of the traditional bonus bid, the rejection of G and V's information hypothesis suggests that these new systems may be unnecessary. 21 references, 5 tables.

Sharing Costs Fairly. A Practical Introduction to Cooperative Game Theory

Abstract: An IIASA executive report based on an IIASA research report by H.P. Young, N. Okada, and T. Hashimoto, who compare traditional methods of allocating costs of new water facilities with more recently developed methods involving cooperative game theory. Their purpose is to show how these methods work in actual use, and the executive report serves as practical introduction to cooperative game theory. The authors have investigated an actual water cost allocation case in the Skane region of southern Sweden. The 18 municipalities of the area were combined into six groups. Costs of a water development project there were first allocated by two naive methods -- proportional to population and proportional to use. Then five techniques of cost allocation derived from cooperative game theory were tried -- separable costs/remaining benefits, Shapley value, nucleolus, weak nucleolus, and proportional nucleolus. The rationale behind each of these methods is explained, and the superiority of the proportional nucleolus in this particular case is demonstrated. The authors note that as a practical matter, however, there are cases when a single numerical criterion such as apportioning costs by population or by use may be preferable to the more complicated game-theory methods. The executive report also discusses briefly a simple method for allocating costs in such cases as the Skane water development project that is based on bidding, a noncooperative type of game that puts the burden of information gathering on the players themselves.

Bridge bidding aid

Abstract: A bridge bidding aid is designed in the form of a booklet having an oversized cover and a plurality of instruction pages that correspond to various opening bids. The booklet is devised such that, when unfolded at the center of a bridge table, the four players can simultaneously and independently consult the notes to decide on their bids. Also, the information is programmed such that when the opening bidder's notes face the opening bidder, the notes pertaining only to responding bids will face the responder and, similarly, the notes for opponent overcalls and responses will be appropriately positioned in front of the opponents.

Equilibrium models of multiple-object auctions

Abstract: This dissertation uses two different game-theoretic models to explore properties of equilibria in multiple-object auctions and presents the results of an empirical test of one of them. The first chapter surveys the most important contributions to auction and bidding theory, discusses some questions which have not yet been answered satisfactorily and outlines some of the specific problems which must be addressed when studying multiple-object auctions as opposed to single-object auctions. Chapter two examines the existence and characterization of pure strategy Nash equilibria in multiple-object auction games in which buyers face a binding constraint on exposure. There are five major results. First, symmetric Nash equilibria exist if and only if there are two or less buyers and two or less objects. Second, a Nash equilibrium may not exist if the seller sets a positive reservation bid. Third, asymmetric solutions to symmetrically parametrized games typically involve "high-low" strategies: buyers submit positive bids only on some restricted subset of the objects. Fourth, Nash equilibria typically generate zero "profits" to the buyers. Fifth, when asymmetric solutions exist and the buyers are identical, these solutions are never unique. Chapter three examines the bundling decisions by a multiproduct monopolist with incomplete information about demand. Previously the bundling problem has been analyzed only in a world of perfect and complete information in which the monopolist uses a standard take-it-or-leave-it pricing scheme. The model in chapter three shows that tied-in sales are sometimes ex ante optimal under a reasonable set of assumptions about a world in which there are no production economies or diseconomies and no demand interdependencies. A number of additional results were obtained deriving general sufficient conditions for buyers to prefer bundling, as well as conditions under which bundling is optimal in terms of maximizing expected consumer plus producer surplus. Chapter four reports the results of an empirical examination of the predictions made in chapter three. Testable hypotheses were developed in that chapter which addressed questions about seller revenues, market efficiency, buyer behavior and distributional consequences of a monopolistic seller's bundling decision in multiple object auctions. The data provide strong support for these theoretically-based hypotheses.

A Theory of Auctions and Competitive Bidding

Abstract: : In Section 2, we review some important results of the received auction theory, introduce a new general auction model, and summarize the results of our analysis. Section 3 contains a formal statement of our model, and develops the properties of affiliated random variables. The various theorems are presented in Sections 4-8. In Section 9, we offer our views on the current state of auction theory. Following Section 9 is a technical appendix dealing with affiliated random variables.

A note on politics and franchise bidding

Abstract: To sum up, one problem posed by critics of franchise bidding is that the unfavorable political participation associated with the present system of regulation would only be accentuated under a franchise scheme. However, we have argued to the contrary that under a franchising scheme political interest could be particularized at the local level. Restricting the franchising body's influence to a specific utility serving a local area decreases monetary cost and increases the incentive of the local regulator to act in the interest of the local constituency. Market forces then would be more active in policing both the franchising body and the firm providing the services.

Soliciting Accurate Evaluations of Public Goods

Abstract: Among the many problems faced by policy makers in attempts to use public funds efficiently, none is more troublesome than that of inducing users of public goods to reveal their demand prices. The difficulty in attempts to solicit demand prices falls under the general rubric of the free-rider problem, and is manifest in the propensity of users to behave strategically when asked to reveal evaluations. Several preference revelation devices have been proposed to surmount this problem, but all of these schemes are seriously flawed. This article presents a device which overcomes some of the flaws contained in previous work. The preference revealing mechanism proposed here is a bidding mechanism which takes advantage of the commonly found trait of risk-aversion to discourage strategic revelations.

International Civil Aviation Policy Options

Abstract: Welfare of air transport consumers depends on the money price of travel and the quality of service. These aspects are summarised in a consumer welfare measure which, combined with measures of producer rents, is used to compare some international civil aviation policy options. These are the current regime, open skies (with subsidies where necessary), deregulation of fares and deregulation of capacity. The cheapest way of pursuing public interest goals is found to be a combination of open skies and subsidies where necessary. It is pointed out that operation of the subsidy policy is not straight-forward but could be implemented by a bidding system. Also cooperation between countries will be required to avoid the ever-present tendency to return to regulation like the current regime.

Blind Bidding: or What Should be Playing at the Bijou?

Abstract: (1981). Blind Bidding: or What Should be Playing at the Bijou? Performing Arts Review: Vol. 11, No. 1, pp. 27-61.

Marketing Services: Impact of Court Rulings

Abstract: Consulting engineers have been the target of numerous court suits to remove uniform fee structures, lift bans on advertising, and permit competitive bidding of professional services. A review of past marketing practices demonstrates a dependence on personal and developmental selling to obtain new assignments, with client satisfaction representing the key element in developing new business for many firms. Most definitions of professional services marketing cite client satisfaction, delivery of services and creditable professional norms as key elements in any firm's sales program. The disadvantages of price competition include: difficulty in preparing a uniform scope of services, a client's limited capability to evaluate proposals, potential for defensive engineering and loss of professionalism. Methods for engineers in private practice to react to the new competitive environment are examined.

Bidding for Land Development

Abstract: This paper is concerned with applying an optimum bidding procedure, originally proposed by Friedman, to the purchase of development land. It is assumed that the vendor sells the land to the highest bidder in a sealed bid auction without any consideration of the design of the proposed development. Friedman's model for optimal bidding is introduced, and a case study is presented to demonstrate its applicability.

The allocative equivalence of contracting and regulation

Abstract: Demsetz broke new ground in the analysis of natural monopoly when he proposed that "the theory of natural monopoly is deficient for it fails to reveal the logical steps that carry it from scale economies in production to monopoly price in the market place" [1968, p. 56]. Rather than the conventional alternatives stressed by economists to deal with natural monopolyprivate monopoly, public monopoly, or public regulation-Demsetz proposed an ingenious bidcling competition to cut the link between unfettered natural monopoly and monopoly price.' This bidding competition consists of potential suppliers submitting price bids with the implicit proviso that a firm will serve all demanders at that price (prices). What results from this competition is that competitive bidding promotes a market outcome where the bidder with the lowest tong-run average cost function wins the contract to operate the natural monopoly at an average-cost price. By the route of competitive bidding and a contracting mechanism Demsetz is able to effect an average-cost pricing solution for natural monopolies, and in his model there is no reason that scale economies bear any particular relation to the number of bidders for the right to operate the natural monopoly. By contrast the regulator attempts to set price equal to the average cost of the regulated firm, but information about the firm's cost conditions is not free. Demsetz's system generates the lowest available average-cost price while the regulator presumably lacks the relevant information to perform the same feat.: As Demsetz wou!d

SINCE THE INTRODUCTION in the early 1950's of the Arrow-Debreu theory of general equilibrium under conditions of certainty, a large literature has evolved seeking to extend that theory to accommodate production and trade under

Abstract: Most rational expectations market equilibrium models are not models of price formation, and naive mechanisms leading to such equilibria can be severely manipulable. In this paper, a bidding model is developed which has the market-like features that bidders act as price takers and that prices convey information. Higher equilibrium prices convey more favorable information about the quality of the objects being sold than do lower prices. Bidders can benefit from trading only if they have a transactions motive or if they have access to inside information. Apart from exceptional cases, prices are not fully revealing. A two stage model is developed in which bidders may acquire information at a cost before bidding and for which the equilibrium price is fully revealing, resolving a well-known paradox.

Closure of "Competitive Bidding for A/E Services? Why Not?"

Abstract: A viable method of competitive bidding for architectural/engineering services is presented. The history of consultant selection procedures is reviewed as well as the controversy that continues today. Various methods of selection are outlined from those that are based on “qualifications” only to those that are based on “price” only. The proposed method of competitive bidding is based on a combination of qualifications and price. This method holds the clients interest, and has an economical and complete project as its primary concern.