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Showing papers on "Bidding published in 2009"


Journal ArticleDOI
TL;DR: In this paper, the authors compare auctions with negotiations in the context of private sector building contracts and find that auctions may perform poorly when projects are complex, contractual design is incomplete and there are few available bidders.
Abstract: Should the buyer of a customized good use competitive bidding or negotiation to select a contractor? To shed light on this question, we offer a framework that compares auctions with negotiations. We then examine a comprehensive data set of private sector building contracts awarded in Northern California during the years 1995-2000. The analysis suggests a number of possible limitations to the use of auctions.Auctions may perform poorly when projects are complex,contractual design is incomplete and there are few available bidders.Furthermore,auctions may still be communication between buyers and sellers,preventing the buyer from utilizing the contractor’s expertise when designing the project. Some implications of these results for procurement in the public sector are discussed.

326 citations



Journal ArticleDOI
TL;DR: In this article, the authors study three competing procurement auction models with endogenous entry and propose structural models of entry and bidding corresponding to the three models under consideration, controlling for unobserved auction heterogeneity, and use the recently developed semi-parametric Bayesian estimation method to analyse the data.
Abstract: Motivated by several interesting features of the highway mowing auction data from the Texas Department of Transportation (TDoT), we study three competing procurement auction models with endogenous entry. Our entry and bidding models provide several interesting implications. For the first time, we show that even within an independent private value paradigm, as the number of potential bidders increases, bidders' equilibrium bidding behaviour can become less aggressive, and the expected procurement cost may rise because the "entry effect" is always positive and may dominate the negative "competition effect". We then develop structural models of entry and bidding corresponding to the three models under consideration, controlling for unobserved auction heterogeneity, and use the recently developed semi-parametric Bayesian estimation method to analyse the data. We select the model that best fits the data, and use the corresponding structural estimates to quantify the "entry effect" and the "competition effect" with regard to the individual bids and the procurement cost. Copyright 2009, Wiley-Blackwell.

236 citations


Journal ArticleDOI
TL;DR: The authors show that hosting a mega-event such as the Olympic Games increases exports and this effect is statistically robust, permanent and large; trade is over 20% higher for host countries.
Abstract: Why should countries offer to host costly ‘mega-events’ such as the Olympic Games? We show that hosting a mega-event increases exports. This effect is statistically robust, permanent and large; trade is over 20% higher for host countries. Interestingly, unsuccessful bids to host the Olympics have a similar impact on exports. We conclude that the Olympic effect on trade is attributable to the signal a country sends when bidding to host the games, rather than the act of actually holding a mega-event. We develop an appropriate formal model and derive conditions under which liberalising countries will signal through a mega-event bid.

210 citations


Journal ArticleDOI
B. Espen Eckbo1
TL;DR: In this article, the authors review recent empirical research documenting offer premiums and bidding strategies in corporate takeovers, ranging from optimal auction bidding to the choice of deal payment form and premium effects of poison pills.

197 citations


Journal ArticleDOI
TL;DR: This paper analyzed data from eBay on charity and non-charity auctions of otherwise identical products and found that consumers will pay more for products that generate charitable donations than those that do not.
Abstract: To study whether consumers will pay more for products that generate charitable donations, we analyze data from eBay on charity and non-charity auctions of otherwise identical products. Charity prices are 6% greater, on average, than non-charity prices. Bids below the closing price are also greater, as are bids by individuals bidding on identical charity and non-charity products. Bidders appear to value charity revenue at least partially as a public good, as they submit bids earlier in charity auctions, stimulating other bidders to bid more aggressively. Our results help explain why firms may pledge charitable donations, green production, or similar activities.

186 citations


Proceedings ArticleDOI
06 Jul 2009
TL;DR: In this paper, a unified convex optimization framework was proposed to connect several pari-mutuel mechanisms for centrally organizing contingent claims markets, such as the logarithmic market scoring rule (LMSR), the cost-function formulation of market makers, and the sequential convex parimutuel mechanism (SCPM).
Abstract: Recently, coinciding with and perhaps driving the increased popularity of prediction markets, several novel pari-mutuel mechanisms have been developed such as the logarithmic market scoring rule (LMSR), the cost-function formulation of market makers, and the sequential convex parimutuel mechanism (SCPM). In this work, we present a unified convex optimization framework which connects these seemingly unrelated models for centrally organizing contingent claims markets. The existing mechanisms can be expressed in our unified framework using classic utility functions. We also show that this framework is equivalent to a convex risk minimization model for the market maker. This facilitates a better understanding of the risk attitudes adopted by various mechanisms. The utility framework also leads to easy implementation since we can now find the useful cost function of a market maker in polynomial time through the solution of a simple convex optimization problem.In addition to unifying and explaining the existing mechanisms, we use the generalized framework to derive necessary and sufficient conditions for many desirable properties of a prediction market mechanism such as proper scoring, truthful bidding (in a myopic sense), efficient computation, controllable risk-measure, and guarantees on the worst-case loss. As a result, we develop the first proper, truthful, risk controlled, loss-bounded (in number of states) mechanism; none of the previously proposed mechanisms possessed all these properties simultaneously. Thus, our work could provide an effective tool for designing new market mechanisms.

184 citations


Posted Content
TL;DR: In this paper, the authors compare the most common methods for selling a company or other asset when participation is costly: a simple simultaneous auction, and a sequential process in which potential buyers decide in turn whether or not to enter the bidding.
Abstract: We compare the most common methods for selling a company or other asset when participation is costly: a simple simultaneous auction, and a sequential process in which potential buyers decide in turn whether or not to enter the bidding. The sequential process is always more efficient. But pre-emptive bids transfer surplus from the seller to buyers. Because the auction is more conducive to entry - precisely because of its inefficiency - it usually generates higher expected revenue. We also discuss the effects of lock-ups, matching rights, break-up fees (as in takeover battles), entry subsidies, etc.

153 citations


Book ChapterDOI
09 Dec 2009
TL;DR: In this paper, the authors characterize what allocations can be implemented with randomized bidding, namely those where the desired share obtained at each price is a nonincreasing function of price, and provide a full characterization of when a set of campaigns are compatible and how to implement them.
Abstract: Display advertising has traditionally been sold via guaranteed contracts --- a guaranteed contract is a deal between a publisher and an advertiser to allocate a certain number of impressions over a certain period, for a pre-specified price per impression. However, as spot markets for display ads, such as the RightMedia Exchange, have grown in prominence, the selection of advertisements to show on a given page is increasingly being chosen based on price, using an auction. As the number of participants in the exchange grows, the price of an impressions becomes a signal of its value. This correlation between price and value means that a seller implementing the contract through bidding should offer the contract buyer a range of prices, and not just the cheapest impressions necessary to fulfill its demand. Implementing a contract using a range of prices, is akin to creating a mutual fund of advertising impressions, and requires randomized bidding. We characterize what allocations can be implemented with randomized bidding, namely those where the desired share obtained at each price is a non-increasing function of price. In addition, we provide a full characterization of when a set of campaigns are compatible and how to implement them with randomized bidding strategies.

151 citations


Journal ArticleDOI
TL;DR: In this article, the authors proposed a typology of Internet auction quality and credibility indicators, adopt and modify Park and Bradlow's (2005) model, and use eBay as an example to examine empirically how different types of indicators help alleviate uncertainty.
Abstract: Internet auction companies have developed innovative tools that enable sellers to reveal more information about their credibility and product quality to avoid the “lemons” problem. On the basis of signaling and auction theories, the authors propose a typology of Internet auction quality and credibility indicators, adopt and modify Park and Bradlow’s (2005) model, and use eBay as an example to examine empirically how different types of indicators help alleviate uncertainty. This empirical evidence demonstrates how Internet auction features affect consumer participation and bidding decisions, what modifies the credibility of quality indicators, and how different buyers react to indicators. The signaling-based hypotheses provide coherent explanations of consumers’ bidding behavior. As the first empirical study to evaluate the signaling role of comprehensive Internet auction institutional features in mitigating the adverse selection problem, this research provides evidence to clarify the economic foundation behind innovative Internet auction designs.

148 citations


Journal ArticleDOI
TL;DR: A hierarchical spectrum trading model is presented to analyze the interaction among WRAN service providers, TV broadcasters, and WRAN users and proposes a joint spectrum bidding and service pricing model for WRANservice providers to maximize their profits.
Abstract: The emerging IEEE 802.22-based wireless regional area network technology will use the same radio spectrum currently allocated for TV service. This standard will use the concept of cognitive radio based on dynamic spectrum access to provide wireless access services in a large coverage area. A brief overview of the current state of the IEEE 802.22 standard is provided with a particular emphasis on the spectrum management (i.e., spectrum sensing and dynamic spectrum access) in this standard. Key research issues related to spectrum trading among TV broadcasters, WRAN service providers, and IEEE 802.22-based cognitive radio users are identified. To this end, a hierarchical spectrum trading model is presented to analyze the interaction among WRAN service providers, TV broadcasters, and WRAN users. In this model a double auction is established among multiple TV broadcasters and WRAN service providers who sell and buy the radio spectrum (i.e., TV bands), respectively. Again, multiple WRAN service providers compete with each other by adjusting the service price charged to WRAN users. We propose a joint spectrum bidding and service pricing model for WRAN service providers to maximize their profits. A non-cooperative game is formulated to obtain the solution in terms of the number of TV bands and the service price of a service provider. Numerical results are presented on the performance of this joint spectrum bidding and pricing model.

Journal ArticleDOI
TL;DR: In this paper, an incomplete information game model is proposed to study the competitive behavior among individual generating companies (GENCOs), in which each GENCO is modeled as an agent and each agent makes strategic generation capacity expansion decisions based on its incomplete information on other GENCOs.
Abstract: To study the competitive behavior among individual generating companies (GENCOs), an incomplete information game model is proposed in this paper in which each GENCO is modeled as an agent. Each agent makes strategic generation capacity expansion decisions based on its incomplete information on other GENCOs. The formation of this game model falls into a bi-level optimization problem. The upper level of this problem is the GENCOs' own decision on optimal planning strategies and energy/reserve bidding strategies. The lower-level problem is the ISO's market clearing problem that minimizes the cost to supply the load, which yields price signals for GENCOs to calculate their own payoffs. A co-evolutionary algorithm combined with pattern search is proposed to optimize the search for the Nash equilibrium of the competition game with incomplete information. The Nash equilibrium is obtained if all GENCOs reach their maximum expected payoff assuming the planning strategies of other GENCOs' remain unchanged. The physical withholding of capacity is considered in the energy market and the Herfindahl-Hirschman index is utilized to measure the market concentration. The competitive behaviors are analyzed in three policy scenarios based on different market rules for reserve procurement and compensation.

Journal ArticleDOI
TL;DR: The simulation results show that by deploying the proposed best-response learning algorithm, the wireless users can significantly improve their own bidding strategies and, hence, their performance in terms of both the application quality and the incurred cost for the used resources.
Abstract: In this paper, we model the various users in a wireless network (eg, cognitive radio network) as a collection of selfish autonomous agents that strategically interact to acquire dynamically available spectrum opportunities Our main focus is on developing solutions for wireless users to successfully compete with each other for the limited and time-varying spectrum opportunities, given experienced dynamics in the wireless network To analyze the interactions among users given the environment disturbance, we propose a stochastic game framework for modeling how the competition among users for spectrum opportunities evolves over time At each stage of the stochastic game, a central spectrum moderator (CSM) auctions the available resources, and the users strategically bid for the required resources The joint bid actions affect the resource allocation and, hence, the rewards and future strategies of all users Based on the observed resource allocations and corresponding rewards, we propose a best-response learning algorithm that can be deployed by wireless users to improve their bidding policy at each stage The simulation results show that by deploying the proposed best-response learning algorithm, the wireless users can significantly improve their own bidding strategies and, hence, their performance in terms of both the application quality and the incurred cost for the used resources

Posted Content
TL;DR: The authors examines a model in which advertisers bid for "sponsored-link" positions on a search engine and the value advertisers derive from each position is endogenized as coming from sales to a population of consumers who make rational inferences about firm qualities and search optimally.
Abstract: This paper examines a model in which advertisers bid for "sponsored-link" positions on a search engine. The value advertisers derive from each position is endogenized as coming from sales to a population of consumers who make rational inferences about firm qualities and search optimally. Consumer search strategies, equilibrium bidding, and the welfare benefits of position auctions are analyzed. Implications for reserve prices and a number of other auction design questions are discussed.

Journal ArticleDOI
TL;DR: In this article, a new and advanced long-term electricity market model that simulates market behavior bottom-up through opportunistic, variable cost-based bidding of individual power plants into auction-based national markets with international interconnection capacities is introduced.
Abstract: In this paper we introduce HECTOR, a new and advanced long-term electricity market model that simulates market behavior bottom-up through opportunistic, variable cost-based bidding of individual power plants into auction-based national markets with international interconnection capacities Unlike most other approaches, we implement the objective function on an hourly level This allows for a reduction of the solution space, and enables a higher modeling resolution, including opportunistic bidding behavior of power plants based on expected supply scarcity, and ex-post investment decisions based on NPV considerations The model simulates the electricity markets of 19 European countries, with over 400 groups of power plants, and is able to closely approximate historic electricity prices The average base load price computed by the model for 2006-2008 and across the largest regions in Europe is 545 €/MWh, compared to 548 €/MWh in reality, using 2005 as training period In a projection until 2040, we find that conventional fossil fuel-fired power plants are replaced both by renewable energy technologies and large quantities of CCS, the latter of which almost fully utilize available CO2 storage capacities in some of the regions studied

Journal ArticleDOI
TL;DR: In this paper, the authors compare the most common methods for selling a company or other asset when participation is costly: a simple simultaneous auction, and a sequential process in which potential buyers decide in turn whether to enter the bidding.
Abstract: We compare the most common methods for selling a company or other asset when participation is costly: a simple simultaneous auction, and a sequential process in which potential buyers decide in turn whether to enter the bidding. The sequential process is always more efficient. But preemptive bids transfer surplus from the seller to buyers. Because the auction is more conducive to entry―precisely because of its inefficiency―it usually generates higher expected revenue. We also discuss the effects of lock-ups, matching rights, break-up fees (as in takeover battles), entry subsidies, etc.

Journal ArticleDOI
TL;DR: The rationale of block order restrictions is discussed and it is argued that the restrictions could be relaxed, which some exchanges have already started doing.

Journal ArticleDOI
TL;DR: In this paper, the authors characterize the trade-offs among firms' compliance strategies in a market-based program where a regulator interested in controlling emissions from a given set of sources auctions off a fixed number of emissions permits.
Abstract: We characterize the trade-offs among firms' compliance strategies in a market-based program where a regulator interested in controlling emissions from a given set of sources auctions off a fixed number of emissions permits. We model a three-stage game in which firms invest in emissions abatement, participate in a share auction for permits, and produce output. We develop a methodology for a profit-maximizing firm to derive its marginal value function for permits and translate this value function into an optimal bidding strategy in the auction. We analyze two end-product market scenarios independent demands and Cournot competition. In both scenarios we find that changing the number of available permits influences abatement to a lesser extent in a dirty industry than in a cleaner one. In addition, abatement levels taper off with increasing industry dirtiness levels. In the presence of competition, firms in a relatively clean industry can, in fact, benefit from a reduction in the number of available permits. Our findings are robust to changes in certain modeling assumptions.

Proceedings ArticleDOI
09 Jun 2009
TL;DR: A market-based Virtual Power Plant model is proposed which provides individual DER units the accesses to current electricity markets and a use case of a MBVPP with micro Combined Heat and Power (µCHP) systems demonstrates the potential benefits and operation scenarios of theMBVPP model.
Abstract: The fast growing penetration of Distributed Energy Resources (DER) and the continuing trend towards a more liberalized electricity market requires more efficient energy management strategies to handle both emerging technical and economic issues. In this paper, a market-based Virtual Power Plant (MBVPP) model is proposed which provides individual DER units the accesses to current electricity markets. General bidding scenario and price signal scenario as two optional operation scenarios are operated by one MBVPP. In the end, a use case of a MBVPP with micro Combined Heat and Power (µCHP) systems demonstrates the potential benefits and operation scenarios of the MBVPP model.

Journal ArticleDOI
TL;DR: In this article, an analytic network process (ANP) is used to derive the relative priorities of risk factors as an input to a decision support tool, which can be utilized during bidding decisions.
Abstract: In this study, an analytic network process (ANP), which can handle the interrelations between risk related factors, is proposed as a reliable technique for measuring the level of risk associated with international construction projects. Within this context, ANP is used to derive the relative priorities of risk factors as an input to a decision support tool, which can be utilized during bidding decisions. The decision support tool may help a decision maker to estimate the level of risk so that alternative projects may be ranked with respect to their risk levels and appropriate contingency values may be defined after a bid decision is given. The tool has a database in which risk information of the rated projects can be stored for future use. The reliability of the tool was tested on eight real cases and satisfactory results were achieved in estimating the risk level.

Book ChapterDOI
TL;DR: In this paper, a simple and natural signal-averaging rule, which does not require recognizing the adverse-selection effect of winning the auction, better characterizes the data than the Nash rule.
Abstract: An experiment analyzing behavior in English common value auctions is reported. English auctions raise more revenue than first-price auctions only when bidders do not suffer from a strong winner's curse. Agents employ other bidders' dropout prices along with their private information as Nash bidding theory predicts. However, a simple and natural signal-averaging rule, which does not require recognizing the adverse-selection effect of winning the auction, better characterizes the data than the Nash rule. Monte Carlo simulations using FIML estimates of the signal-averaging rule predict a number of data characteristics not directly employed in the estimation procedure. Copyright 1996 by American Economic Association.

Journal ArticleDOI
TL;DR: In this article, an alternative procurement model based on cooperative procurement procedures that facilitates cooperation between clients and contractors in construction projects is proposed and empirically tested. But the model is based on four multi-item constructs: incentive-based compensation, limited bidding options, partner selection and cooperation.

Journal ArticleDOI
TL;DR: This paper examined the bidding behavior of students and non-students in experimental auctions by comparing their willingness to pay (WTP) values for a good and found that there was no significant difference between the WTP bids of the two groups.

Journal ArticleDOI
TL;DR: The procurement process selection problem of a large industrial buyer who employs reverse auctions for awarding procurement contracts is examined, contrasting two classes of commonly used strategies under multiple sourcing; namely, single-stage reverse auctions, and two-stage processes where price-quantity adjustments between the buyer and the suppliers follow a first-stagereverse auction.
Abstract: We examine the procurement process selection problem of a large industrial buyer who employs reverse auctions for awarding procurement contracts. We contrast two classes of commonly used strategies under multiple sourcing; namely, single-stage reverse auctions, and two-stage processes where price-quantity adjustments between the buyer and the suppliers follow a first-stage reverse auction. Deriving bounds of efficiency for these two classes of procurement processes under convex supplier production costs, we present insights on the conditions under which each class is preferable for the buyer. Considering the effect of contracting and processing costs, a single-stage process is likely to be preferable to a two-stage process when the number of bidding suppliers is high, especially when capacity is rigid. A two-stage process with one information transfer in the second stage may be the preferred procurement mode when production is highly scalable, i.e., when the marginal production cost increase with increased production is small. When the number of suppliers is low, the effect of a decrease in production scalability depends on the current scalability level. For high scalability levels, a decrease in production scalability may decrease the efficiency of both single-stage and simple two-stage processes, whereas for low scalability levels, it tends to increase efficiency for both of these process classes. A decrease in production costs makes employing simple processes more attractive when production is highly scalable or when supplier capacity is rigid. For intermediate production scalability, however, a cost decrease may make employing two-stage processes with multiple information transfers in the second round preferable for the buyer.

Journal ArticleDOI
TL;DR: The establishment of design projects’ bidding selection systems should manage to realize the benefits equilibrium between stakeholders, considering the different interests requirement from different interests groups.

Journal ArticleDOI
TL;DR: In this paper, the effect of bidding competition, information asymmetry, reserve price, bid decrement, auction duration, and bidder type on buyer surplus was studied in business-to-business (B2B) procurement auctions.
Abstract: Although the initial euphoria about Internet-enabled reverse auctions has given way to a cautious but widespread use of reverse auctions in business-to-business (B2B) procurement, there is a limited understanding of the effect of auction design parameters on buyer surplus. In this paper, we study the effect of bidding competition, information asymmetry, reserve price, bid decrement, auction duration, and bidder type on buyer surplus. We collected field data on more than 700 online procurement auctions conducted by a leading auctioneer and involving procurement items worth millions of dollars. Consistent with the predictions of auction theory, the results indicate that bidding competition, reserve price, and information sharing affect buyer surplus. Unlike previous findings in the consumer-to-consumer context, we find that bid decrement and auction duration have no effect in B2B procurement auctions. Our results suggest that use of the rank-bidding format increases buyer surplus when incumbent suppliers participate in the auction. We discuss the theoretical and managerial implications of these findings for future research and for optimal design of online procurement auctions.

Journal ArticleDOI
TL;DR: In this paper, the authors compare three mechanisms used to raise money for charities: first-price winner-pay auctions, first price all-pay auction, and lotteries.
Abstract: We experimentally compare three mechanisms used to raise money for charities: first-price winner-pay auctions, first-price all-pay auctions, and lotteries. We stay close to the characteristics of most charity auctions by using an environment with incomplete information and independent private values. Our results support theoretical predictions by showing that the all-pay format raises substantially higher revenue than the other mechanisms.

Proceedings ArticleDOI
20 Apr 2009
TL;DR: This work studies the design of a bidding agent that implements a display advertising campaign by bidding in a auction-based marketplaces for display ads, and provides algorithms for both the full information and partially observable settings.
Abstract: Motivated by the emergence of auction-based marketplaces for display ads such as the Right Media Exchange, we study the design of a bidding agent that implements a display advertising campaign by bidding in such a marketplace. The bidding agent must acquire a given number of impressions with a given target spend, when the highest external bid in the marketplace is drawn from an unknown distribution P. The quantity and spend constraints arise from the fact that display ads are usually sold on a CPM basis. We consider both the full information setting, where the winning price in each auction is announced publicly, and the partially observable setting where only the winner obtains information about the distribution; these differ in the penalty incurred by the agent while attempting to learn the distribution. We provide algorithms for both settings, and prove performance guarantees using bounds on uniform closeness from statistics, and techniques from online learning. We experimentally evaluate these algorithms: both algorithms perform very well with respect to both target quantity and spend; further, our algorithm for the partially observable case performs nearly as well as that for the fully observable setting despite the higher penalty incurred during learning.

Journal ArticleDOI
TL;DR: In this paper, the authors compared sniping to early bidding in auctions for newly-released DVDs on eBay and found that sniping led to a statistically significant increase in the aver age surplus.
Abstract: We conducted a field experiment to test the benefit from late bid ding {sniping) in online auction markets. We compared sniping to early bidding {squatting) in auctions for newly-released DVDs on eBay. Sniping led to a statistically significant increase in our aver age surplus. However, this improvement was small. The two bidding strategies resulted in a variety of other qualitative differences in the outcomes of auctions. We show that a model of multiple concurrent auctions, in which our opponents are naive or incremental bidders as identified in the lab, explain the results well. Our findings illus trate how the overall impact of naivete, and the benefit from sniping observed in the lab, may be substantially attenuated in real-world market settings. {JEL D44)

Journal ArticleDOI
TL;DR: In this article, the authors compared 28 mobile telephone markets and found that countries allocating greater bandwidth to licensed operators and achieving more competitive market structures are estimated to realize efficiencies that generally dominate those associated with license sales.
Abstract: Economic analysis of spectrum policy focuses on government revenues derived via competitive bidding for licenses. Auctions generating high bids are identified as “successful” and those with lower receipts as “fiascoes.” Yet spectrum policies that create rents impose social costs. Most obviously, rules favoring monopoly predictably increase license values but reduce welfare. This article attempts to shift analytical focus to efficiency in output markets. In performance metrics derived by comparing 28 mobile telephone markets, countries allocating greater bandwidth to licensed operators and achieving more competitive market structures are estimated to realize efficiencies that generally dominate those associated with license sales. Policies intended to increase auction receipts (e.g., reserve prices and subsidies for weak bidders) should be evaluated in this light.