We study non-binding procurement auctions where both price and non-price characteristics of bidders matter for being awarded a contract. The outcome of such auctions critically depends on how information is distributed among bidders during the bidding process. As we show theoretically, whether it is in the buyer's interest to conceal or to disclose non-price information most importantly depends on how important the quality aspects of the good to be procured are to the buyer: The more important the quality aspects are to the buyer, the more interesting concealment becomes. We then empirically study the impact of a change in the information structure using data from a large European online procurement platform for different categories of goods. In a counterfactual analysis we analyze the reduction of non-price information available to the bidders. In the data we find that the choice of information structure indeed matters. Confirming the hypothesis obtained in our theoretical framework, we find that in auction categories where bidders' non-price characteristics are of little importance for the decisions of the buyers, concealment of non-price information decreases buyers' welfare by up to 6% due to reduced competitive pressure leading to higher bids. In contrast, for categories where bidders' non-price characteristics strongly influence buyers' decisions concealment of non-price information increases buyers' welfare by up to 15%. for their helpful comments and suggestions. Sebastian Stoll gratefully acknowledges financial support by the Deutsche Forschungsgemein-schaft (DFG) through GRK 801.
When complex procurement projects are conducted it is often not possible to write complete contracts. As a consequence, the relationship between buyer and supplier is important for the success of the project. In this paper we investigate the claim that auctions in procurement can be detrimental for the buyer-supplier relationship, which is in line with the observation that reverse auctions are less frequently conducted if projects are complex. A poor relationship can result in a decrease in trust on the part of the buyer during the sourcing process, and an increase in the supplier's opportunistic behavior following sourcing. We consider a setting in which the winning supplier decides on the level of quality to provide to the buyer, and compare a standard reverse auction and a buyer-determined reverse auction, both analytically and in the laboratory. We find that the buyer-determined reverse auction can perform better than the standard reverse auction both from the buyer's and the suppliers' perspective. In a buyer-determined reverse auction, it may be optimal for the buyer to select the supplier who submitted a higher bid, which may in turn induce this supplier to deliver higher quality. Standard auctions, however, yield lower prices but reduce cooperation. The degree of trust, as reflected by a larger number of transactions and a higher average e ciency of trade, is significantly higher in buyer-determined reverse auctions. Theoretical reasoning based on other-regarding preferences organizes our data well.
We analyze the problem of a buyer who chooses a supplier for a long-term relationship via an auction. The buyer lacks commitment to not renegotiate the terms of the contract in the long run. Thus, suppliers are cautious about the information revealed during the auction. We show theoretically and experimentally that first-price auctions perform poorly in terms of efficiency and buyer surplus. Suppliers may pool on a high bid to conceal information. Second-price auctions retain their efficient equilibrium and generate substantial surplus for the buyer. We demonstrate that optimal mechanisms require concealing the winning bid with a strictly positive probability.
We test the importance of social norms for market interactions associated with negative real-world externalities in a large-scale experiment with a heterogeneous population sample from Germany. The majority of experimental participants refuses to trade, thus behaving in a moral way. Our data suggest the importance of norm conformity for the decision to trade as a significant share of buyers and sellers condition market entry on the decisions of others. Moreover, a majority of observers is willing to incur personal costs to sanction trading. Moral behavior is significantly linked to demographic characteristics and stated preferences and attitudes of the participants.
Die Dis cus si on Pape rs die nen einer mög lichst schnel len Ver brei tung von neue ren For schungs arbei ten des ZEW. Die Bei trä ge lie gen in allei ni ger Ver ant wor tung der Auto ren und stel len nicht not wen di ger wei se die Mei nung des ZEW dar.Dis cus si on Papers are inten ded to make results of ZEW research prompt ly avai la ble to other eco no mists in order to encou ra ge dis cus si on and sug gesti ons for revi si ons. The aut hors are sole ly respon si ble for the con tents which do not neces sa ri ly repre sent the opi ni on of the ZEW. imposes virtually no restrictions on the ability to discriminate. We propose a simple rule -imitation perfection -that restricts discrimination significantly.It ensures that in every equilibrium bidders with the same value distribution and the same valuation earn the same expected surplus. If all bidders are homogeneous, revenue and social surplus optimal auctions which are consistent with imitation perfection exist. For heterogeneous bidders however, it is incompatible with revenue and social surplus optimization. Thus, a trade-off between non-discrimination and optimality exists.JEL classification: D44, D73, D82, L13
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