Showing papers on "Bidding published in 1996"

Method of conducting an on-line auction with bid pooling

Abstract: A method of conducting an on-line auction that permits individual bidders to pool bids during a bidding session. The auction is conducted over a computer network that includes a central computer, a number of remote computers, and communication lines connecting the remote computers to the central computer. A number of bidding groups are registered in the central computer, each bidding group having a total bid for the item being auctioned. Bids entered from the remote computers are received in the central computer, each bid including a bid amount and a bid designation. Each bid amount is contributed to the total bid of the bidding group indicated by the bid designation. The bidding group having the largest total bid at the end of the bidding session wins the item being auctioned.

The design and implementation of a secure auction service

Abstract: We present the design and implementation of a distributed service for performing sealed bid auctions. This service provides an interface by which clients, or "bidders", can issue secret bids to the service for an advertised auction. Once the bidding period has ended, the auction service opens the bids, determines the winning bid, and provides the winning bidder with a ticket for claiming the item bid upon. Using novel cryptographic techniques, the service is constructed to provide strong protection for both the auction house and correct bidders, despite the malicious behavior of any number of bidders and fewer than one third of the servers comprising the auction service. Specifically, it is guaranteed that: bids of correct bidders are not revealed until after the bidding period has ended; the auction house collects payment for the winning bid; losing bidders forfeit no money; and only the winning bidder can collect the item bid upon. We also discuss techniques to enable anonymous bidding.

Secure auction systems

Abstract: The apparatus and method of the present invention provide secure auction service for use in a network having servers and bidding terminals. The auction service makes transactions among servers and bidding terminals subject to a distributed protocol. The distributed protocol distributes submitted bids among the multiple servers, closes a bidding period, verifies validity of monetary value of each submitted bid by utilizing said distributed protocol and determines a winning bidder.

Regulation and administered contracts revisited: Lessons from transaction-cost economics for public utility regulation

Abstract: This article reexamines the administered contracts approach to regulation in light of recent empirical research that establishes the importance of transaction-costs in the organizational choice and design decisions. After reviewing the fundamentals of transaction cost reasoning and the franchise bidding-versus-regulation debate, the study surveys the empirical literature on franchise bidding, contracting, and vertical integration. The implications of transaction-cost theories for current policies toward pubic utility regulation and deregulation are also addressed.

Limitations of the Vickrey Auction in Computational Multiagent Systems

Abstract: Auctions provide an efficient distributed mechanism for solving problems such as task and resource allocation in muitiagent systems. In the Vickrey auction--which has been widely advocated for automated auctions [22; 1; 3; 5; 24; 2; 8; 9; 20; 13J--the best bid wins the auction, but at the second best price. In certain settings this promotes truthful bidding and avoids counterspeculation. This paper analyses the circumstances when this protocol is appropriate, and explicates the desirable properties and lack thereof in varied settings. The first part of the paper discusses known deficiencies of the Vickrey auction: bidder collusion, a lying auctioneer, promotion of lying in non-private-value auctions, lower revenue than alternative protocols, and the necessity to reveal sensitive information. The second part of the paper presents our results regarding new limitations of the protocol, which arise especially among computational agents. These include inefficient allocation and lying in sequential suctions of interrelated items, untruthful bidding when a risk averse agent has local uncertainty, and the need for counterspeculation to make deliberation control (or information gathering) decisions when an agent has local uncertainty.

Negotiation among self-interested computationally limited agents

Abstract: In multiagent systems, computational agents search for and make contracts on behalf of the real world parties that they represent. This dissertation analyses negotiations among agents that try to maximize payoff without concern of the global good. Such a self-interested agent will choose the best negotiation strategy for itself. Accordingly, the interaction protocols need to be designed normatively so that the desired local strategies are best for the agents--and thus the agents will use them--then certain desirable social outcomes follow. The normative approach allows the agents to be constructed by separate designers and/or to represent different parties. Game theory also takes a normative approach, but full rationality of the agents is usually assumed. This dissertation focuses on situations where computational limitations restrict each agent's rationality: in combinatorial negotiation domains computational complexity precludes enumerating and evaluating all possible outcomes. The dissertation contributes to: automated contracting, coalition formation, and contract execution. The contract net framework is extended to work among self-interested, computationally limited agents. The original contract net lacked a formal model for making bidding and awarding decisions, while in this work these decisions are based on marginal approximations of cost calculations. Agents pay each other for handling tasks. An iterative scheme for anytime task reallocation is presented. Next it is proven that a leveled commitment contracting protocol enables contracts that are impossible via classical full commitment contracts. Three new contract types are presented: clustering, swaps and multiagent contracts. These can be combined into a new type, CSM-contract, which is provably necessary and sufficient for reaching a globally optimal task allocation. Next, contracting implications of limited computation are discussed, including the necessity of local deliberation scheduling, and tradeoffs between computational complexity and monetary risk when an agent can participate in multiple simultaneous negotiations. Finally, issues in distributed asynchronous implementation are discussed. A normative theory of coalitions among self-interested, computationally limited agents is developed. It states which agents should form coalitions and which coalition structures are stable. These analytical prescriptions depend on the performance profiles of the agents' problem solving algorithms and the unit cost of computation. The prescriptions differ significantly from those for fully rational agents. The developed theory includes a formal application independent domain classification for bounded rational agents, and relates it precisely to two traditional domain classifications of fully rational agents. Experimental results are presented. Unenforced exchange methods are particularly desirable among computational agents because litigation is difficult. A method for carrying out exchanges without enforcement is presented. It is based on splitting the exchange into chunks that are delivered one at a time. Two chunking algorithms are developed, as well as a nontrivial sound and complete quadratic chunk sequencing algorithm. Optimal stable strategies for carrying out the exchange are derived. The role of real-time is also analyzed, and deadline methods are developed that do not themselves require enforcement. All of these analyses are carried out for isolated exchanges as well as for exchanges where reputation effects prevail. Finally, it is argued that the unenforced exchange method hinders unfair renegotiation. The developed methods in all three subareas are domain independent. The possibility of scaling to large problem instances was shown experimentally on an ${\cal N}P$-complete distributed vehicle routing problem. The large-scale problem instance was collected from five real-world dispatch centers. (Abstract shortened by UMI.)

Stabilization, Syndication, and Pricing of IPOs

Abstract: We argue that in the after-market trading of an IPO, the underwriting syndicate, by standing ready to buy back shares at the offer price ("price stabilization"), compensates uninformed investors ex post for the adverse selection cost they face in bidding for IPOs. This domi? nates ex ante compensation by underpricing. The reason is that stabilization exploits ex post information about investor demand whereas underpricing must be based on ex ante infor? mation. However, liquidity and syndication costs constrain the use of stabilization which, in equilibrium, generates some underpricing as well. We develop a model that formalizes this intuition and generates several empirical implications.

Secure anonymous information exchange in a network

Abstract: Computer network management for electronic commerce requires technical implementations of business processes. The process addressed here is a technical method for a communication in which two or more parties legitimately want to communicate anonymously, often before discussing a deal or closing a business, e.g. for anonymous bidding or auctioning in electronic commerce. Essentially, the invention is a method, described by a protocol, for safely exchanging data in a network that provides a public key infrastructure and an anonymous communication possibility between network users. It consists of a sequence of steps in which both parties, sender, e.g. customer, and addressee, e.g. merchant, compose data sets, i.e. requests and replies, that are based on received data and/or prior knowledge. The data sets are enciphered, as far as necessary to provide anonymity, and digitally signed, as far as necessary to provide proof of the partner. The invention is also a system designed to implement the invented method.

Bidding in Common Value Auctions: How the Commercial Construction Industry Corrects for the Winner's Curse

Abstract: Experienced construction industry executives suffer from a winner's curse in laboratory common value auction markets (Dyer et al. [Dyer, D., J. H. Kagel, D. Levin. 1989. A comparison of naive and experienced bidders in common value offer auctions: Laboratory analysis. Econom. J. 99 108–115.]). This paper identifies essential differences between field environments and the economic theory underlying the laboratory markets that account for the executives' success in the field and a winner's curse in the lab. These are (1) industry-specific mechanisms which enable contractors to escape the winner's curse even when they bid too low, (2) learned, industry-specific evaluative processes which enable experienced contractors to avoid the winner's curse in the first place, and (3) important private value elements that underlie bidding. Also identified are a number of industry-specific bidding characteristics whose evolution can be explained using modern auction theory. Lessons are drawn regarding the use of experime...

Deficit Reduction Through Diversity: How Affirmative Action at the FCC Increased Auction Competition

Abstract: INTRODUCTION 2 I. THEORY 4 A. Set-Asides Can Enhance Intragroup Competition Among Strong Bidders 6 B. Bidding Credits Can Create Effective Set-Asides 7 C. Bidding Credits Can Create Intergroup Competition 7 D. Affirmative Action Can Increase Expected Revenue When the Government Is Imperfectly Informed About Bidder Valuations 7 E. Affirmative Action Can Destabilize Tacit Collusion 9 II. EMPIRICISM 9 A. Describing the Licenses and the Auction Rules 10 B. The Impact of Affirmative Action 14 1. Comparing the nationwide and regional results 14 2. The impact of designated crossover bidding 17 3. The impact of the set-aside licenses. 22 C. Alternative Hypotheses 23 1. Hiding in the grass 24 2. The designated bidders would have bid anyway 25 3. Affirmative action might have chilled non-designated bidder participation 26 D. Strategic Perversities: Bidding Above Atomistic Reservation Prices 26 1. Risk of partial aggregation. 26 2. Raising rivals’ costs and predatory strategies. 27 3. Reduced retail competition. 28 III. APPLICATIONS TO GOVERNMENT PROCUREMENT AND PRIVATE EMPLOYMENT 29 A. Government Procurement 29 B. Private Employment 31 IV. LEGAL IMPLICATIONS 32 A. Public Affirmative Action 32 1. Revenue enhancement is constitutionally insufficient. 32 2. Did the FCC’s rules enhance minority or female control of the airwaves ? 33 3. Affirmative action costs the government less than is commonly assumed. 34 B. Private Affirmative Action May Deserve Higher Scrutiny 35 CONCLUSION 36 APPENDIX 37

Utility-theory model for bid markup decisions

Abstract: A utility theory model, which is one of three generic methods for bid markup determination, is developed using 21 criteria in the bidding decision. The majority of the criteria are evaluated subjectively by a decision maker, and numerical quantification and evaluation is typically difficult for such criteria. Previous works of Saaty, Lifson and Shaifer, and Ahmad and Minkarah are used to develop a simplified approach using straight-line utility functions to resolve such difficulty. This bidding model accommodates the variation of different decision makers' attitude in the weighting of criteria, and thus the model can be customized to different preferences and bias of risk. Considering the subjectivity of the process, the writers consider the accuracy of this approach to be acceptable for the use of utility theory as one of the decision making tools that are available to assist the construction contractor in determination of bid(s) markup during bid preparation.

The Price Is Right, but Are the Bids? An Investigation of Rational Decision Theory

Abstract: The television game show The Price Is Right is used as a laboratory to conduct a preference-free test of rational decision theory in an environment with substantial economic incentives It is found that contestants' strategies are transparently suboptimal In response to this evidence, simple rules of thumb are developed that are shown to explain observed bidding patterns better than rational decision theory Further, learning during the show reduces the frequency of strategic errors This is interpreted as evidence of bounded rationality Finally, there is no evidence that a concern for fairness significantly alters bidding behavior Copyright 1996 by American Economic Association

Collusion in Uniform-Price Auctions: Experimental Evidence and Implications for Treasury Auctions

Abstract: In uniform-price auctions of shares there exist collusive equilibria in which bidders capture the entire surplus from the auction as well as competitive equilibria in which the auctioneer captures the entire surplus from the auction. We provide experimental evidence that, in uniform-price auctions, non-binding pre-play communication facilitates convergence to collusive equilibrium outcomes. On the other hand, regardless of the opportunities for communication, in discriminatory-auction experiments subject strategies conform closely with the unique equilibrium in undominated strategies in which bidders' gains are equal to the smallest "tick size" in the bidding schedule. This evidence suggests that uniform-price auctions of Treasury securities may result in lower revenues than the currently employed discriminatory procedure.

Framework for the incorporation of demand-side in a competitive electricity market

Abstract: The paper discusses the importance of simultaneous plant production and demand reduction scheduling which is required for the establishment of a full electricity market where demand-side has opportunity to compete with generators, as is the case with the England & Wales Pool's demand-side bidding (DSB) scheme. It also emphasises that demand cannot be generally treated as negative generation because of the ability of demand to redistribute itself in response to price based load management activities. In that sense, an adequate scheduling methodology of available resources (from supply and demand-sides) is needed to facilitate the new market. However, traditional formulations of the plant scheduling problem are not valid when load reduction is available, as gross demand is not known in advance. For that purpose a composite model for optimal generation and demand reduction scheduling is presented in the paper. It is shown that this model can be used for a comprehensive evaluation of possible scenarios for the implementation of demand-side bidding into the electricity market and the assessment of the influence of DSB on total production costs, system marginal price (SMP) profile, capacity element payments and benefit allocation between producers and consumers.

Priced based operation in an auction market structure

Abstract: Open transmission access is a new legal requirement within the electric power industry. Interchange will require evaluation of the existing conditions to determine if the product can be delivered at the time required and at the level awarded through the bidding or negotiation process. This paper seeks to identify the likely deregulation details for a full market implementation when native load is considered equal to any other third party load (comparability). This paper seeks to identify the technical issues, such as standards and algorithms, necessary for changing the national infrastructure from a vertically integrated industry to a horizontally integrated industry.

The Determinants of Outcome in UK Take–over Bids

Abstract: In this paper we have investigated the determinants of the outcome of 238 friendly and hostile take–over bids that occurred in the UK during the 1980s. We also use our model for prediction purposes and in order to map the effects of a variety of independent variables on the probability of the bid being successful. Our main results can be summarised as follows. First, target management resistance and the wealth effect of a bid are key determinants of the outcome of a bid. Second, we find limited evidence to suggest that share ownership by the bidding company and by target directors also contributes significantly to bid outcome. In the latter case we find a non–linear relationship consistent with the argument that when director holdings are low the bid is discouraged but when they are high the bid is encouraged. Third, our model is good at predicting outcome for all bids but weak at predicting the outcome of hostile bids on their own.

The great school milk conspiracies of the 1980s

Abstract: Various dairy companies' allocation of school milk contracts using signalling, sham bids to honor incumbency and other devices are examined to determine whether bidding was collusive or pure oligopolistic interdependent behavior following noncooperative game theory. The schemes used to allocate contracts were found to be efficient methods for reaching agreements. Since pure interdependent (noncoorperative) behavior requires rivals to corelate signals, coordinate expectations, and resolve timing-uncertainty problems within sealed-bidding constraints, detailed analysis of the economic evidence of bidding practices requires rejection of a Nash equilibrium explanation for the behavior.

Cost containment through pharmaceutical procurement: a Caribbean case study.

Abstract: This article discusses the potential for health sector cost containment in developing countries through improved pharmaceutical procurement. By describing the specific example of the Eastern Caribbean Drug Service (ECDS), which provides a pooled procurement service to nine ministries of health in the small island nations of the Caribbean, it examines the elements of the procurement operation that allowed ECDS to reduce unit costs for pharmaceuticals by over 50 per cent during its first procurement cycle. The analysis of ECDS considers: (1) political will, institutional alliances, and the creation of a public sector monopsony; (2) pooling demand; (3) restricted international tendering and the pharmaceutical industry; (4) estimating demand and supplier guarantees; (5) reducing variety and increasing volume through standardizing pack sizes, dosage forms and strengths; (6) generic bidding and therapeutic alternative bidding; (7) mode of transport from foreign suppliers; (8) financing mechanisms, including choice of currency, foreign exchange, and terms of payment; (9) market conditions and crafting and enforcing supplier contracts; and, (10) the adjudication process, including consideration of suppliers' past performance, precision requirements in the manufacturing process, number of products awarded to suppliers, and issues of judgment. The authors consider the relevance of this agency's experience to other developing countries by providing a blueprint that can be adopted or modified to suit other situations.

Potential competition and possible collusion in forest service timber auctions

Abstract: I. INTRODUCTION Potential entrants to an imperfectly competitive market, in theory, limit the ability of existing firms to charge high prices. This claim has rarely been tested, due mainly to the problems of identifying potential entrants and determining whether established firms perceive them as future competition. In previous work, Neal [1987] finds option bid-ask spreads lower when they are eligible for multiple listing, Kuhlman and Johnson [1983] find winning highway construction bids insignificantly related to the number of firms buying plans for the particular project, and Hurdle et al. [1989] show that performance in the airline industry is affected by the number of potential entrants not deterred by economies of scale or scope. This paper determines whether potential competition influenced winning bids in Forest Service oral and sealed-bid timber auctions held during 1977. Prior to 1977 oral bidding was the dominant method of selling timber in the Pacific Northwest. The National Forest Management Act of 1976 required that sealed bidding be used on all sales with exceptions made only by the Secretary of Agriculture. The sealed bidding requirement was overturned in 1978 after firms in communities dependent upon Forest Service timber complained that sealed bidding resulted in greater uncertainty in obtaining steady timber supplies.(1) Firms pay the government for the rights to harvest timber in Forest Service timber auctions and the highest bid wins. Bidding theory predicts that greater competition should result in higher winning bids.(2) The relevant measure of competition in an oral auction is the actual number of competitive bidders. Participants in a sealed-bid auction, however, should base their bids on the potential number of competitors. Timber is costly to haul and timber transportation distances, from the sale site to the closest mill of potential competitors, are used to define two measures of potential competition. The first measure is a simple count of the number of firms whose closest mill lies within the geographical market for Forest Service timber auctions and is termed potential competition. The second results from a probit analysis relating auction participation to hauling distance and is called expected competition. The results show that these measures are, as expected, considerably more important in explaining winning sealed bids. However, actual competition explains winning bids better than either potential or expected competition under both oral and sealed bidding. In addition, contrary to expectations, increases in hauling distances result in higher winning bids when sealed bidding is used. Collusion in sealed-bid auctions and preclusive bidding (a type of collusion) in oral auctions are explanations for both of these results. The possibility of collusion in sealed-bid auctions is supported by an index, based on Stigler's [1964] theory of oligopoly and Feinstein, Block and Nold's [1985] research on bid-rigging in highway construction auctions, representing the likelihood that a given auction was rigged. Mead [1966] was among the first to discuss the possibility of preclusive bidding in oral auctions. Preclusive bidding occurs when firms close to a sale site bid above levels which are profitable to firms farther from the site. Given that oral bidding entails greater participation costs (participants must be present), preclusive bidding or the threat of preclusive bidding deters outsider firms from bidding in future oral auctions. Firms close to the site benefit from the decreased competition and may win at a lower price. Oral and sealed-bid comparisons of winning bid variances, overbids, and numbers of bidders support the explanation of preclusive bidding in oral auctions. Public policy should be concerned with obtaining the highest possible value for public timber and ensuring that it is awarded efficiently, to the firm having the highest timber value. …

Competitive Pricing for Medicare

Abstract: This text discusses the problems of America's Medicare programme, analyzing the possible use of competitive bidding as an idea for reform.

Industrial marketing relationships and open‐to‐tender contracts

Abstract: Explores the complexity of supply‐chain management businesses, such as the motor industry and electronics, looking at new initiatives which are emerging between role partners in an effort to reconcile the needs of quality, cost reduction, innovation and customer satisfaction. Observes current trends towards achieving these difficult objectives which promote closer buyer‐seller relationships, joint ventures and strategic alliances, yet notes that the open‐to‐tender bidding process is still extensively used for a number of key components and services. Based on a study within the Scottish electronics industry, examines the effects of open‐to‐tender contracts on total quality management and on buyer‐supplier relationships. Suggests that, while both buyers and their suppliers are talking the relationship game, the reality is that the rules are seldom explicit, communication between the parties is inadequate and therefore relationships tend to be on a superficial level, and lacking real commitment on joint product development, cost reduction strategies and effective integrated systems. Found that competitive tendering came into conflict with the total quality management philosophy, and that attempts to build and sustain long‐term relationships were undermined by short‐term competitive pressures.

Bargaining procedures that induce honesty

Abstract: When bargaining between two actors over an object is modeled as a noncooperative game of incomplete information, equilibrium bids generally involve misrepresentation of the players' true values. But the bargainers' payoffs can be modified so that truthfully revealing one's reservation price is a dominant strategy. While such modifications define bargaining procedures that induce honesty in bidding and thereby avoid an inefficient outcome, these procedures may be vulnerable to other difficulties. The procedures analyzed are the following:Bonus Procedure: the players share a bonus equal to the overlap in their bids, whenever a settlement is feasible;Penalty Procedure: the settlement is reduced (usually probabilistically) to a level proportionate to the overlap of the bids, whenever a settlement is feasible;Appraisal Procedure: there is a settlement when, and only when, an independent appraisal is above the seller's and below the buyer's bid. The appraisal value is then the exchange price;Expansive Appraisal Procedure: there is a settlement at the appraised value, unless it is unfavorable toboth the buyer and the seller. These honesty-inducing procedures are evaluated according to several criteria, namely, efficiency in achieving feasible trades, ability to be self-financing (rather than requiring a subsidy), vulnerability to collusion, and compatibility with each player's individual interests. Besides these theoretical assessments, practical considerations, including the need for a settlement, the means of implementation, and so on, are discussed.

Designing Toll Road Concessions: Lessons from Argentina

Abstract: Argentina began to concession its intercity highways and the access roads to Buenos Aires in the early 1990s. It first offered the intercity highways for competitive bids, setting the terms, the tolls, and the service levels and basing bid selection primarily on the rental offered for the infrastructure. When it concessioned the access roads in a second round, it set the terms and the investments and selected the bid offering the lowest tolls. The results so far have been mixed. Investment has lagged, but maintenance of the intercity highways has improved. The authors review the lessons from this experience and identify some of the challenges for future concessions: following clear and simple rules in the bidding process, establishing clear rules for renegotiation, and strengthening regulatory capacity.

Exploring the links between audit and the research process.

Abstract: The policy background The last decade has witnessed an explosion of activity among health professionals under the banner of audit and quality. Prior to the publication of Working for Patients ( 1 ) such activities were entirely optional, but the NHS Review ( 1 ) introduced a requirement to develop them. Since then the DoH has funded separate programmes of audit for the medical professions on the one hand, and the nursing and therapy professions on the other. Funds totalling more than £220 million ( 2 ) were distributed via two channels - through the regional health authorities for local bidding mainly among provider units, and through a central bidding process for national projects such as those sponsored by the royal colleges. This programme ended in 1995 when audit funds were devolved to health commissions to facilitate audit activities on a more local basis.