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Taking the Lab to the Field: Experimental Tests of Alternative Mechanisms to Procure Multiple Contracts

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  • Anders Lunander

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  • Jan-Eric Nilsson

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    Abstract

    The first part of the paper reports the results from a sequence of laboratory experiments comparing the bidding behavior for multiple contracts in three different sealed bid auction mechanisms; first-price simultaneous, first-price sequential and first-price combinatorial bidding. The design of the experiment is based on experiences from a public procurement auction of road markings in Sweden. Bidders are asymmetric in their cost functions; some exhibit decreasing average costs of winning more than one contract, whereas other bidders have increasing average cost functions. The combinatorial bidding mechanism is demonstrated to be most efficient. The second part of the paper describes how the lab experiment was followed up by a field test of a combinatorial procurement auction of road markings. Copyright Kluwer Academic Publishers 2004

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    File URL: http://hdl.handle.net/10.1023/B:REGE.0000008654.68169.08
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    Bibliographic Info

    Article provided by Springer in its journal Journal of Regulatory Economics.

    Volume (Year): 25 (2004)
    Issue (Month): 1 (January)
    Pages: 39-58

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    Handle: RePEc:kap:regeco:v:25:y:2004:i:1:p:39-58

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    Web page: http://www.springerlink.com/link.asp?id=100298

    Related research

    Keywords: multiple units; non-constant costs; asymmetric redemption values; alternative procurement mechanisms;

    References

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    1. Klemperer, Paul, 1998. "Auctions with almost common values: The 'Wallet Game' and its applications," European Economic Review, Elsevier, vol. 42(3-5), pages 757-769, May.
    2. Marshall Robert C. & Meurer Michael J. & Richard Jean-Francois & Stromquist Walter, 1994. "Numerical Analysis of Asymmetric First Price Auctions," Games and Economic Behavior, Elsevier, vol. 7(2), pages 193-220, September.
    3. Ledyard, John O. & Olson, Mark & Porter, David & Swanson, Joseph A. & Torma, David P., 2000. "The First Use of a Combined Value Auction for Transportation Services," Working Papers 1093, California Institute of Technology, Division of the Humanities and Social Sciences.
    4. von Ungern-Sternberg, Thomas, 1991. "Swiss Auctions," Economica, London School of Economics and Political Science, vol. 58(231), pages 341-57, August.
    5. Peter Cramton, 1997. "The FCC Spectrum Auctions: An Early Assessment," Papers of Peter Cramton 97jemsfcc, University of Maryland, Department of Economics - Peter Cramton, revised 12 Jul 1998.
    6. McAfee, R Preston & McMillan, John, 1992. "Bidding Rings," American Economic Review, American Economic Association, vol. 82(3), pages 579-99, June.
      • McAfee, R. Preston & McMillan, John., 1990. "Bidding Rings," Working Papers 726, California Institute of Technology, Division of the Humanities and Social Sciences.
    7. Robert W. Rosenthal & Ruqu Wang, 1995. "Simultaneous Auctions with Synergies and Common Values," Papers 0060, Boston University - Industry Studies Programme.
    8. Vijay Krishna & Robert Rosenthal, 1995. "Simultaneous Auctions with Synergies," Papers 0056, Boston University - Industry Studies Programme.
    9. Gale, Ian, 1990. "A multiple-object auction with superadditive values," Economics Letters, Elsevier, vol. 34(4), pages 323-328, December.
    10. Bykowsky, Mark M. & Cull, Robert J. & Ledyard, John O., 1998. "Mutually Destructive Bidding: The FCC Auction Design Problem," Working Papers 916, California Institute of Technology, Division of the Humanities and Social Sciences.
    11. Katzman, Brett, 1999. "A Two Stage Sequential Auction with Multi-Unit Demands," Journal of Economic Theory, Elsevier, vol. 86(1), pages 77-99, May.
    12. Cramton, Peter & Schwartz, Jesse A, 2000. "Collusive Bidding: Lessons from the FCC Spectrum Auctions," Journal of Regulatory Economics, Springer, vol. 17(3), pages 229-52, May.
    13. Branco, Fernando, 2001. "On the superiority of the multiple round ascending bid auction," Economics Letters, Elsevier, vol. 70(2), pages 187-194, February.
    14. Avery, Christopher & Hendershott, Terrence, 2000. "Bundling and Optimal Auctions of Multiple Products," Review of Economic Studies, Wiley Blackwell, vol. 67(3), pages 483-97, July.
    15. Branco, Fernando, 1997. "Sequential auctions with synergies: An example," Economics Letters, Elsevier, vol. 54(2), pages 159-163, February.
    16. Armstrong, Mark, 2000. "Optimal Multi-object Auctions," Review of Economic Studies, Wiley Blackwell, vol. 67(3), pages 455-81, July.
    17. John O. Ledyard & David Porter & Antonio Rangel, 1997. "Experiments Testing Multiobject Allocation Mechanisms," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 6(3), pages 639-675, 09.
    18. Porter, David, 1997. "The Effect of Bid Withdrawal in a Multi-Object Auction," Working Papers 982, California Institute of Technology, Division of the Humanities and Social Sciences.
    19. David P. Porter, 1999. "The effect of bid withdrawal in a multi-object auction," Review of Economic Design, Springer, vol. 4(1), pages 73-97.
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    Citations

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    Cited by:
    1. De Silva, Dakshina G. & Kankanamge, Anuruddha & Kosmopoulou, Georgia, 2007. "A change in the timing of auctions with synergies and its impact on bidding behavior," Economics Letters, Elsevier, vol. 95(1), pages 60-65, April.
    2. de Jong, Gerard, 2012. "Application of experimental economics in transport and logistics," European Transport \ Trasporti Europei, ISTIEE, Institute for the Study of Transport within the European Economic Integration, issue 50, pages 3.
    3. Hultkrantz, Lars & Lunander, Anders, 2013. "Design of a Combinatorial Bidding Market for Green Corridor Freight," Working Papers 2013:6, Örebro University, School of Business.
    4. Dakshina G. De Silva & Anuruddha Kankanamge & Georgia Kosmopoulou, 2005. "The Impact Of Change In Auction Format On Bidding Behavior," Microeconomics 0512009, EconWPA.
    5. Lunander, Anders & Lundberg, Sofia, 2011. "Do Combinatorial Procurement Auctions Lower Cost? - An Empirical Analysis of Public Procurement of Multiple Contracts," UmeÃ¥ Economic Studies 825, Umeå University, Department of Economics.
    6. Sherstyuk, Katerina & Dulatre, Jeremy, 2008. "Market performance and collusion in sequential and simultaneous multi-object auctions: Evidence from an ascending auctions experiment," International Journal of Industrial Organization, Elsevier, vol. 26(2), pages 557-572, March.
    7. Katerina Sherstyuk, 2009. "A comparison of first price multi-object auctions," Experimental Economics, Springer, vol. 12(1), pages 42-64, March.

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