Information Provision in Procurement Auctions

We study two well‐known electronic markets: an over‐the‐counter (OTC) market, in which each trader looks for the best counterpart through bilateral negotiations, and a double auction (DA) market, in which traders post their quotes publicly. We focus on the DA–OTC efficiency gap and show how it varies with different market sizes (10, 20, 40, and 80 traders). We compare experimental results from a sample of 6400 undergraduate students in Economics and Management with zero‐intelligence agent‐based simulations. Simulation results show that the traded quantity increases with market size under both DA and OTC. Experimental results confirm the same tendency under DA, while the share of periods in which the traded quantity is lower than the efficient one increases with market size under OTC, ultimately leading to a DA–OTC efficiency gap increasing with the market size. We rationalize these results by putting forward a simple model of OTC market as a repeated bargaining procedure under incomplete information on buyers' valuations and sellers' costs. We show that efficiency decreases slightly with size due to two counteracting effects: acceptance rates in earlier interactions decrease with size, and earlier offers increase, but not always enough to compensate for the decrease in acceptance rates.

Section: Introductionmentioning

confidence: 99%

Zero‐intelligence versus human agents: An experimental analysis of the efficiency of Double Auctions and Over‐the‐Counter markets of varying sizes

Attanasi

Centorrino

Manzoni

2021

“…(g) Exogenous institutional changes (e.g., new environmental norms or amendments to the legal system) alter and c and produce a new cumulative probability of challenge distribution that will first-order stochastically dominate the former distribution when the legal system becomes more restrictive (i.e., an increase in clauses subject to challenge) or will be first-order stochastically dominated by the former distribution following deregulation. Coleff and García (2017) show that more information disclosure to bidders is welfare-detrimental when there are entry costs associated with bidding for public contracts. More precise information guarantees that only accurate offers are submitted, but also induces harsh competition and severely limits the expected profits for any given seller.…”

Section: Endogeneity Of Opportunistic Challengementioning

confidence: 96%

“…Coleff and García () show that more information disclosure to bidders is welfare‐detrimental when there are entry costs associated with bidding for public contracts. More precise information guarantees that only accurate offers are submitted, but also induces harsh competition and severely limits the expected profits for any given seller.…”

Section: A Model Of Procurement Under Political Contestabilitymentioning

confidence: 99%

“…More information disclosure to bidders, however, may be welfare‐detrimental. Under costly and competitive bidding, public agents may find it optimal to introduce noise into the information that they communicate to bidders, when more precise information fine‐tunes the accuracy of submitted offers, but also severely diminishes bidders' expected profit (Coleff & García, ).…”

Section: Related Literaturementioning

confidence: 99%

See 1 more Smart Citation

Political contestability and public contracting

Moszoro

Spiller

2018

Do public agents undertake socially inefficient activities to protect themselves? In politically contestable markets, part of the lack of flexibility in the design and implementation of the public procurement process reflects public agents' risk adaptations to limit the political hazards from opportunistic third parties—political opponents, competitors, and interest groups. Reduced flexibility limits the likelihood of opportunistic challenges, while externalizing the associated adaptation costs to the public at large. We study this matter and provide a comprehensive theoretical framework with empirically testable predictions.

“…), in the contest literature (e.g. Colef & Garcia, 2017) or in contexts in which senders care about their reputation (Garrido et al, 2020;Ottaviani & Sørensen, 2006;Zimper & Molefinyane, 2020).…”

Section: Hennigsmentioning

confidence: 99%

Conflict prevention by Bayesian persuasion

Hennigs

2021

Drawing upon the Bayesian persuasion literature, I show that a mediator can provide conflicting parties strategically with information to decrease the ex-ante war probability. In a conflict between two parties with private information about military strength, the mediator generates information about each conflicting party's strength and commits to sharing the obtained information with the respective opponent. The conflicting parties can be convinced not to fight each other. The conflicting parties benefit from mediation, as the ex-ante war probability is reduced. The benefit is taken up by weak conflicting parties. This benefit is larger when war is costlier and when the war probability absent mediation is higher. | INTRODUCTIONUnderstanding conflict resolution and prevention is a central concern of international relations. Mediation is one of the most widely used techniques in international crises management. Mediation occurred in 37 out of the 84 conflicts registered by the International Crisis Behaviour Project in the period from 1990 to 2015. For 27 out of these 37 cases, mediation was named as either an "important" or the "most important" factor for easing tensions (see Brecher & Wilkenfeld, 1997;Brecher et al., 2017). This paper contributes to the theoretical understanding of effective mediation by showing how a mediator can use research and intelligence to reduce the ex-ante war probability. Specifically, a mediator can convince conflicting parties not to fight each other by strategically providing them information about their respective opponent.This is an open access article under the terms of the Creative Commons Attribution-NonCommercial-NoDerivs License, which permits use and distribution in any medium, provided the original work is properly cited, the use is non-commercial and no modifications or adaptations are made.