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The CMS Auction: Experimental Studies of a Median-Bid Procurement Auction with Nonbinding Bids

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  • Brian Merlob
  • Charles R. Plott
  • Yuanjun Zhang

Abstract

We report on the experimental results of simple auctions with (i) a median-bid pricing rule and (ii) nonbinding bids (winning bids can be withdrawn)--the two central pillars of the competitive bidding program designed by the Centers for Medicare and Medicaid Services (CMS). Comparisons between the performance of the CMS auction and the performance of the excluded-bid auction reveal the problematic nature of the CMS auction. The CMS auction fails to generate competitive prices of goods and fails to satisfy demand. In all proposed efficiency measures, we find the excluded-bid auction significantly outperforms the CMS auction. Copyright 2012, Oxford University Press.

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Bibliographic Info

Article provided by Oxford University Press in its journal The Quarterly Journal of Economics.

Volume (Year): 127 (2012)
Issue (Month): 2 ()
Pages: 793-827

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Handle: RePEc:oup:qjecon:v:127:y:2012:i:2:p:793-827

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Cited by:
  1. Anthony M. Kwasnica & Katerina Sherstyuk, 2013. "Multi-Unit Auctions," Working Papers 201301, University of Hawaii at Manoa, Department of Economics.
  2. John Kautter & Gregory Pope, 2014. "Competitive bidding for Medicare Part B clinical laboratory services," International Journal of Health Care Finance and Economics, Springer, Springer, vol. 14(2), pages 95-108, June.
  3. Peter Cramton, 2012. "Designed to Fail: The Medicare Auction for Durable Medical Equipment," Papers of Peter Cramton 12cekdtf, University of Maryland, Department of Economics - Peter Cramton, revised 2012.

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