Showing papers on "Bidding published in 1992"
TL;DR: In this article, the authors categorize outside directors as either independent of or having some affiliation with managers, and find that bidding firms on which independent outside directors hold at least 50% of the seats have significantly higher announcement-date abnormal returns than other bidders.
1,694 citations
TL;DR: This article analyzed the influence of various factors on shareholder wealth creation in mergers and acquisitions using a multivariate framework and found that while the target firm's shareholders gain significantly from M&A, those of the bidding firm do not.
Abstract: This study analyzes the empirical literature concerning the influence of various factors on shareholder wealth creation in mergers and acquisitions using a multivariate framework. Overall, results indicate that while the target firm's shareholders gain significantly from mergers and acquisitions, those of the bidding firm do not. Findings also indicate that the use of stock financing has a significant impact on the wealth of both the target and bidding firms' shareholders. The presence of multiple bidders and the type of acquisition influence the bidders' return, while regulatory changes and tender offers influence the targets' returns. The paper also provides a comparison of our findings with that of previous narrative reviews and discusses their implications from the viewpoint of managers and researchers.
562 citations
Posted Content•
TL;DR: In this article, the authors examine bidding in auctions for state highway construction contracts on Long Island in the early 1980s, in order to determine whether bid rigging occurred, and find that collusion is possible because of limited participation in the collusive scheme.
Abstract: This paper examines bidding in auctions for state highway construction contracts on Long Island in the early 1980s, in order to determine whether bid rigging occurred. Detection of collusion is possible because of limited participation in the collusive scheme. The paper looks at differences in behavior between ring members and non-members. In these auctions, collusio did not take the form of a bid rotation scheme, in which only one ring member submits a bid. Instead, several ring members bid on most jobs. The apparent role of ring meetings prior to the auction was to designate a serious bidder, and its bid, and the other firms then frequently submitted phony higher bids. The bidding data indicate that the bids of non-cartel firms, as well as their rank distribution, were related to cost measures, such as how much backlog a firm was carrying. In contrast, the rank distribution of higher cartel bids was unrelated to similar cost measures, and differed from the distribution of the low cartel bid.
500 citations
TL;DR: A new and comprehensive class of algorithms for solving the classical linear network flow problem and its various special cases such as shortest path, max-flow, assignment, transportation, and transhipment problems are surveyed.
Abstract: This paper surveys a new and comprehensive class of algorithms for solving the classical linear network flow problem and its various special cases such as shortest path, max-flow, assignment, transportation, and transhipment problems. The prototype method, from which the other algorithms can be derived, is the auction algorithm for the assignment problem. This is an intuitive method that operates like a real auction where persons compete for objects by raising their prices through competitive bidding; the prices can be viewed as dual variables. Conceptually, auction algorithms represent a significant departure from the cost improvement idea that underlies primal simplex and dual ascent methods; at any one iteration, they may deteriorate both the primal and the dual cost. Auction algorithms perform very well for several important types of problems, both in theory and in practice, and they are also well suited for parallel computation.
452 citations
TL;DR: In this article, two simple theoretical models of rational bidding at sealed-bid auctions are mapped into an empirical specification, and applied this empirical framework to data from a sample of tree planting contract auctions held in the province of British Columbia, Canada.
339 citations
TL;DR: In this paper, the authors analyze split award procurement auctions in which a buyer divides full production between two suppliers or awards all production to a single supplier and suppliers have private cost information, and they explore conditions under which split award auctions may be preferred to winner-take-all auctions.
Abstract: We analyze split award procurement auctions in which a buyer divides full production between two suppliers or awards all production to a single supplier, and suppliers have private cost information. An intriguing feature of split awards is that the equilibrium bids are implicitly coordinated. Because a split award price is the sum of offered split prices, each supplier can unilaterally veto a split award by bidding very high for the split. The need to coordinate is reflected in a split price that does not vary with private information. We also explore conditions under which split award auctions may be preferred to winner-take-all auctions.
178 citations
TL;DR: In this article, the authors describe the importance and characteristics of six critical success factors that are vital for project sponsors in their endeavors to win lucrative BOT contracts, including entrepreneurship, picking the right project, a strong team of stakeholders, an imaginative technical solution, a competitive financial proposal, and the inclusion of special features in the bid.
Abstract: The build-operate-transfer (BOT) concept represents a step forward in meeting the needs of developing countries for more capital investments in infrastructure and industrial construction. However, for a private-sector consortium bidding for a BOT concession, the road to winning a major BOT contract is not easy. The consortium must be willing to take calculated risks and at the same time be adaptable to changing demands and circumstances in the host country. This paper describes the importance and characteristics of six critical success factors (CSF) that are vital for project sponsors in their endeavors to win lucrative BOT contracts. These factors are: entrepreneurship, picking the right project, a strong team of stakeholders, an imaginative technical solution, a competitive financial proposal, and the inclusion of special features in the bid.
155 citations
Book•
01 Jan 1992
TL;DR: Part I: Strategies of Decision-making: The Art and Science of Strategy Playing Games as Games Understanding Conflict and Cooperation Weighing Risks Part II: Negotiating: Gaining Bargaining Power Using Information Strategically Negotiate International Trade Agreements Part III: Contracting: Creating Incentives Designing Contracts Setting Executives' Incentive Part IV: Bidding: Bying in Competition Bidding in Olympic Competition Part V: The Strategic Manager: Organizing a Network of Subcontractors Putting it all together Appendix: The Details of the Games More Games Reading Guide
Abstract: Part I: Strategies of Decision-making: The Art and Science of Strategy Playing Games as Games Understanding Conflict and Cooperation Weighing Risks Part II: Negotiating: Gaining Bargaining Power Using Information Strategically Negotiating International Trade Agreements Part III: Contracting: Creating Incentives Designing Contracts Setting Executives' Incentives Part IV: Bidding: Bidding in Competition Bidding in Olympic Competition Part V: The Strategic Manager: Organizing a Network of Subcontractors Putting it all Together Appendix: The Details of the Games More Games Reading Guide
132 citations
TL;DR: This paper considers the asymmetric assignment problem and proposes a new auction algorithm that uses in a novel way the recently proposed idea of reverse auction, where, in addition to persons bidding for objects by raising their prices, objects competing for persons by essentially offering discounts.
Abstract: In this paper we consider the asymmetric assignment problem and we propose a new auction algorithm for its solution The algorithm uses in a novel way the recently proposed idea of reverse auction, where in addition to persons bidding for objects by raising their prices, we also have objects competing for persons by essentially oering discounts In practice, the new algorithm apparently deals better with price wars than the
115 citations
TL;DR: The vast majority of construction contracts are procured using the low-bid system as mentioned in this paper, where price is the sole basis for determining the successful bidder, and this traditional approach has...
Abstract: The vast majority of construction contracts are procured using the lowbid system. In the low bid system price is the sole basis for determining the successful bidder. This traditional approach has ...
113 citations
Posted Content•
TL;DR: In this article, Ochs and Roth argue that the expected cost of deviations from risk-neutral Nash equilibrium (RNNE) bidding in these auctions was quite small (less than $005 at the median), so that in terms of expected monetary payoffs ("payoff space") many subjects had little to lose from deviating from the RNNE strategy.
Abstract: In his recent paper in this Review, Glenn Harrison (1989) argues that the conclusions of James Cox et al (1982, 1983, 1985, 1988) in their studies of first-price private-value auctions are not well supported, because of shortcomings in the way their experimental investigations were designed, analyzed, and reported Harrison argues that the expected cost of deviations from risk-neutral Nash equilibrium (RNNE) bidding in these auctions was quite small (less than $005 at the median), so that in terms of expected monetary payoffs ("payoff space") many subjects had little to lose from deviating from the RNNE strategy Harrison suggests that the significance of the differences Cox, Vernon Smith, and James Walker (hereafter CSW) report between subjects' bids and the RNNE bids (deviations in the "message space") may therefore need to be reexamined In discussing Harrison versus CSW we have three primary points to make' First, in arguing that "it is more natural to evaluate subject behavior in expected payoff space" (Harrison, 1989 p 749), we think Harrison has overstated his case However, we agree with his more important point that looking at the cost of deviations is a useful diagnostic tool for determining when experimenters are likely to have lost control over subjects' incentives Further, as we will show in Section I, this part of Harrison's critique applies with special force to CSW's studies of bidding Second, a broader examination of the results of private-value auction experiments indicates that risk aversion cannot be the only factor and may well not be the most important factor behind bidding above the RNNE found so often in first-price privatevalue auctions The most telling evidence here is bidding above the dominant bid price found in second-price auctions (Kagel et al, 1987; Kagel and Levin, 1990) and the risk-loving found under several treatment conditions in CSW's (1984) own multipleunit discriminative auctions (auctions in which the high bidders pay their bid price) These and other data inconsistent with risk-averse bidding are largely ignored in CSW (1988) but are nevertheless relevant to the substantive issue of risk aversion in private-value auctions They are discussed in Section II Third, there are data gathered in other investigations which provide strong support for the view that the deviations from RNNE bidding reported in first-price auctions are not the results of the low expected cost of such deviations However, these data, unlike the higher-stakes payoff data that CSW offer in response to Harrison, are not consistent with CSW's subsidiary conclusions that the data can be well accounted for by a narrow class of risk-aversion parameters for the bidders, together with the assumption that all agents are playing a Nash equilibrium of the resulting game of incomplete information A key difference between these experiments and CSW's is that if subjects do not respond to CSW's treatment condition (increasing the payoffs from experimental to US dollars) their behavior will be consistent with CSW's theory In contrast, * Department of Economics, University of Pittsburgh, Pittsburgh, PA 15260 We thank Jack Ochs and Emilie Roth for thoughtful discussions on earlier drafts of the paper, Jim Cox and Glenn Harrison for helpful comments on the initial draft of the paper, Susan Garvin for research assistance, and Ray Battalio, Carl Kogut, and Don Meyer for providing us with access to their data Research support was provided by the Information Science and Technology and Economics divisions of the National Science Foundation, the Alfred P Sloan Foundation, and the Russell Sage Foundation The usual caveat applies with special force IWe do not respond to specific comments that CSW (1992) make in response to our comment as, in order to avoid indefinite regress, the ground rules for this debate required us to comment on CSW's criticism of Harrison, after which they would be given the opportunity to respond to our comment
TL;DR: In this article, the authors examined the relationship between the competitiveness of contract bids entered by individual bidders through the variables of bidder size, contract value and project type and found that, in terms of competitiveness, there is a relationship between size of bidder and size of contract.
Abstract: This paper examines the relationship between the competitiveness of contract bids entered by individual bidders through the variables of bidder size, contract value and project type. The analysis indicates that, in terms of competitiveness, there is a relationship between the size of bidder and size of contract. This concurs with previous work in the field. Bidders having competitiveness affinities towards particular types of projects, although apparent, appear to be weaker for the private sector than found in previous work concerning the public sector.
TL;DR: In this paper, the authors examine the characteristics of the pooled auction and compare it to the ordinary English auction, and to establish why this form is often chosen by real estate sellers and auctioneers.
TL;DR: In this paper, a mathematical model is proposed which attempts to objectively exploit variation trends in client-provided quantities, and the model can be solved by linear programming and the maximum-minimum method.
Abstract: This paper examines unbalanced contract bidding, a strategy for the allocation of rates to unit quantities for the benefit of the bidder. A mathematical model is proposed which attempts to objectively exploit variation trends in client-provided quantities. It is shown that the model can be solved by two methods - linear programming and the maximum–minimum method. The maximum–minimum method is preferred for most real-world situations.
Book•
09 Oct 1992
TL;DR: In this article, the authors describe the requirements for success of a contract construction company and its objectives, as well as its competition bidding strategy in theory, in order to match the Markup to the job.
Abstract: What to Expect from Strategic Bidding An Introduction to Competitive Business Strategy The Strategic Approach The Contract Construction Industry The Requirements for Success Establishing the Company's Objectives Problems with Profits Planning Your Profit Objectives Estimating and Controlling Costs Overhead and Fixed Costs Break-Even Analysis Profits and Profit Analysis How to Figure the Odds Risk and Uncertainty Principles of Information Management Analyzing the Competition Bidding Strategy in Theory Matching the Markup to the Job The Databid System Results: The Measure of Success References Appendix Index.
Posted Content•
TL;DR: In this article, the U.S. offshore oil and gas lease sales, conducted by the Department of the Interior since 1954, are discussed, including bidding for leases, the government's decision whether to accept the highest bid, the incidence and timing of exploratory drilling, and the formation of bidding consortia.
Abstract: This paper describes the U.S. offshore oil and gas lease sales, conducted by the Department of the Interior since 1954. Several decision problems are discussed, including bidding for leases, the government's decision whether to accept the highest bid, the incidence and timing of exploratory drilling, and the formation of bidding consortia. It is argued that equilibrium models that emphasize informational and strategic issues, and that account for institutional features of the leasing program, provide accurate predictions of outcomes.
TL;DR: In this paper, the authors presented a method by which the probability of winning in the competitive bidding problem can be improved by obtaining additional information concerning a key competitor, which they used to improve the performance of the competitive auction.
Abstract: This paper presents a method by which the probability of winning in the competitive bidding problem can be improved by obtaining additional information concerning a key competitor. The competitive ...
TL;DR: In this paper, the authors developed a simple theoretical model with three active bidders and three units for sale to show how price anomalies may emerge in a condominium auction and made an estimation of a hedonic price model using data from three separate dates.
Abstract: When many similar properties are being auctioned, auctioneers often resort to the pooled design. The winning bidder of a given round is given a choice among all the unclaimed (pooled) properties. Bidding strategy depends on expectations of rival bidders' behavior as well as personal valuation. Anecdotal evidence from condominium auctions suggests that bidding decisions can produce price anomalies. This study develops a simple theoretical model with three active bidders and three units for sale to show how such anomalies may emerge. Estimation is then made of a hedonic price model using data from a condominium auction of 53 units on three separate dates. The empirical results support the view that the best buys are found in the middle of the auction with overpayments at the beginning and end.
Patent•
19 Aug 1992
TL;DR: In this paper, a method for playing a wagering or bidding game whose outcome is determined by randomly received symbols is provided, where a plurality of players are each dealt a hand using the cards or other symbols and then players in turn make increasing bids on a suit total until the last player is called by the next player to bid.
Abstract: A method for playing a wagering or bidding game whose outcome is determined by randomly received symbols is provided. Initially, symbols such as cards having a numerical value of one, two, or three as well as a designation as one of two suits are supplied. In addition, there are also no value cards having no suit. A plurality of players are each dealt a hand using the cards or other symbols and then players in turn make increasing bids on a suit total until the bid of a last player is called by the next player to bid. This suit total is the total of added numerical values of the cards of the selected suit in the hands of all of the players. The no value cards are also preferably used and bids can also be made on the number of these cards in the hands of the players. Alternately, the symbols are displayed on a video display screen as part of an electronic game device.
TL;DR: In this article, the authors investigated the returns to the shareholders of the bidding firms in corporate takeovers and found small significant positive abnormal returns to shareholders of cash bidders and significant negative abnormal returns for shareholders who used full or partial script offers.
Abstract: This paper investigates the returns to the shareholders of the bidding firms in corporate takeovers. Previous studies have given inconclusive results and we believe this is a consequence of failing to control information or wealth transfer effects arising from the method of payment used in the acquisition. An event study was performed using recent Australian takeovers partitioned by method of payment. We found small significant positive abnormal returns to the shareholders of cash bidders and significant negative abnormal returns to the shareholders of bidders who used full or partial script offers.
TL;DR: In this paper, the authors investigated the association between method of payment, long-term performance plans, managerial stockholdings and abnormal returns to bidding firms at takeover announcements, using a cross-sectional regression methodology.
Abstract: This study investigates the association between method of payment, long-term performance plans, managerial stockholdings and abnormal returns to bidding firms at takeover announcements, using a cross-sectional regression methodology. Previous studies have examined each of these factors separately. The results indicate that firms with long-term performance plans and high managerial stockholdings in cash offers experience significantly higher abnormal returns at the announcement of mergers prior to 1980. The study provides additional evidence in explaining the previous conflicting results (Jensen and Ruback, 1985), examining the stock market reaction of bidding firms at merger announcements.
TL;DR: In this paper, the authors consider the theoretical issues surrounding the use of private companies in natural monopolies and provide an extensive examination of the problems that confronted one large city in its efforts to privatize its wastewater treatment system.
Abstract: Most authorities agree that privatization works best with vigorous competition among alternative service providers. Such competition may be difficult to achieve for certain services such as public utilities, for which a limited number of private firms exist to bid. This research first considers the theoretical issues surrounding the use of private companies in natural monopolies. Then it provides an extensive examination of the problems that confronted one large city in its efforts to privatize its wastewater treatment system. Beset by lack of competitive bidding and growing costs, Oklahoma City eventually was forced to make major changes in its procedures for handling its sewage disposal plants. The city did not return to municipal operation, however, and the city is now satisfied with the current arrangement under which a private firm operates all four of its wastewater treatment plants.
TL;DR: In this article, a model of pricing in an uncertain auction from the point of view of a typical firm is presented. But the authors do not evaluate the success of formulary pricing.
Abstract: In this paper, the author evaluates the success of formulary pricing. Formulary pricing is a price-tendering system used to generate competition among drug suppliers. The paper develops a model of pricing in an uncertain auction from the point of view of a typical firm. The ability to make side-payments in the form of kickbacks to pharmacists segments the transaction into two stages. After the first-stage bidding, the second stage involves a renegotiation between pharmacists and the supplying firm. An econometric test for this model is developed and the empirical evidence is found to support the model well.
TL;DR: In practice, competition in major weapon systems procurements has come to mean the potential use of a second producer at some stage of the procurement as mentioned in this paper, which is two options that are frequently employed.
Abstract: High costs, lengthy delays, and poor quality in U.S. major weapon systems procurements have prompted repeated calls for reform in defense acquisition procedures. A leading theme of these calls for reform has been for an increased use of competitive procurement practices. 1 In practice, competition in major weapon systems procurements has come to mean the potential use of a second producer at some stage of the procurement. Dual sourcing and second sourcing are two options that are frequently employed. Simultaneous production from two sources is dual sourcing. One firm may develop the technology and engage in initial production. The technology is then transferred to a second firm, perhaps originally via a relatively high cost 'learning buy.' Production awards are then split between the two buyers, with the majority of production awarded to the firm that was judged to be superior (generally, the lower cost producer) in the previous award. The additional costs of dual sourcing are the second set of fixed costs, technology transfer costs, and reduced movement down the producers' learning curves. The benefits are in terms of improved incentives to reduce costs and increase quality on the part of the producers. Second sourcing involves a technology transfer in the same manner as dual sourcing, but all future production is then awarded to one of the two firms in a one time bidding contest. The competitive bid should reduce the price that the DoD pays for production, relative to a negotiated price in a sole-source environment. Many studies have attempted to determine the savings (in terms of price decreases) from second or dual sourcing. Such competitive practices appear to lower prices, but whether they are cost-effective when additional capital costs are included is uncertain. 2 The surveys and critiques provided by Anton and Yao (1990) and Pilling (1989) however, suggest that methodological difficulties limit the usefulness of these studies.
TL;DR: In this paper, the authors examined various aspects of the evaluation problem facing electric utilities and found that the value of the dispatchability increases with the variable cost of operation, and that the most important cost associated with projects offering only limited curtailment.
Abstract: Competitive bidding for electric generating capacity is beginning to emphasize dispatchability. The authors examine various aspects of the evaluation problem facing electric utilities. Recent private power contracts are used to illustrate the range and limits upon flexibility that are being offered. Only detailed production simulation models can capture the cost implications of the features being offered. The value of the dispatchability was found to increase with the variable cost of operation. The most important cost found was associated with projects offering only limited curtailment. Procedures for incorporating subtle dispatch effects in a broader evaluation framework are identified. >
TL;DR: This article showed that the actual number of bidding participants is more closely related with variables of interest (winning bids, average bid per acre, etc.) than is the simple number of bids.
TL;DR: In this paper, the authors show that in many simple dynamic games, there are subgame-perfect equilibria that involve the seller's giving up the good for free, even if the seller has an informational advantage that allows bidders from learning the bidding behavior of their opponents.
Abstract: A single seller of an indivisible object wishes to sell the good to one of many buyers. The seller has zero value for the good, the buyers have a commonly known identical value of one. This article attempts to determine strategic environments that ensure the seller's ability to exploit the competitive behavior of the buyers to extract all the surplus in the game. I show that in many simple dynamic games, there are subgame-perfect equilibria that involve the seller's giving up the good for free. Even if the seller has an informational advantage that allows him to keep bidders from learning the bidding behavior of their opponents, there still exist (perfect Bayesian) equilibria that involve a sale at the price of zero. However, in this case, a simple refinement in the spirit of sequential equilibria can be used to rule out such collusive behavior and to show that the unique equilibrium outcome satisfying this refinement yields the seller a price of one.
Posted Content•
TL;DR: In this article, the economic role and performance of rotating savings and credit associations (Roscas) is analyzed using a model in which individuals save for an indivisible durable consumption good.
Abstract: This paper analyzes the economic role and performance of a type of financial insti- tution which is observed world-wide - rotating savings and credit associations (Roscas). Using a model in which individuals save for an indivisible durable consumption good, we study Roscas which distribute funds using random allocation and bidding. Each type of Rosca allows individuals without access to credit markets to improve their welfare but, under a reasonable assumption on preferences, random allocation is preferred when indivi- duals have identical tastes. This conclusion does not generally hold when individuals are heterogeneous. We also discuss the sustainability of Roscas given the possibility of default.
01 Jan 1992
TL;DR: In this paper, a new look at public utility regulation through a revolving door is presented, with a focus on the impact of IntraLATA competition on local exchange company prices.
Abstract: 1 The Antitrust Law and Economics of Essential Facilities in Public Utility Regulation.- 2 The Environmental Impact of Public Utility Regulation: Kern County and the Case of the Missing Gas Pipelines.- 3 The Impact of IntraLATA Competition on Local Exchange Company Prices.- 4 Incentive Regulation, Capital Recovery and Technological Change in Public Utilities.- 5 Environmental Regulation Effects on Utility Profitability and Direction: Emission Allowance Endowments and Markets.- 6 Price-Cap Regulation, Incentives for Cost Reduction, and Stockholder-Ratepayer Conflicts.- 7 Franchise Bidding with Vickrey Auctions:How to Regulate Utilities?.- 8 Flexibility versus Completeness in Long Term Contractual Relationships: Contracting Between Utilities and IPPs.- 9 A New Look at Public Utility Regulation Through a Revolving Door.