Advanced Search
MyIDEAS: Login to save this paper or follow this series

Transparency And Bidding Competition In International Wheat Trade

Contents:

Author Info

  • Wilson, William W.
  • Dahl, Bruce L.
  • Johnson, D. Demcey

Abstract

One of the major trade policy problems identified by U.S. interests, including grower groups, traders, and policymakers, is that of pricing transparency. This has been a gnawing issue generally related to the pricing practices of competitor exporting countries with state trading enterprises (STEs). The transparency problem generally refers to the inability to observe rivals' terms of trade (including price, quality, credit, etc.) and is normally associated with commercial exporters competing against STE rivals. The perception being the less transparent competitors (STEs) would have a strategic advantage. A game theory model of bidding competition was developed to simulate the effects of information asymmetry amongst rivals. A Bayes-Nash equilibrium was used to derive equilibrium solutions. Several stylized examples were used to illustrate aspects of competition and to analyze effects on bidding strategies. Results indicate that: 1) anything that reduces uncertainties among rivals would reduce equilibrium bids and prices; 2) bidding situations in which there is less transparency have the effect of increasing bids and prices to buyers, and payoffs to sellers; and 3) increases in the number of rivals have the effect of reducing bids and mitigating the informational advantages of STEs. In all cases, less transparent sellers have an advantage in bidding competition relative to more transparent sellers. That advantage in our stylized case was in the area of 1-2$/mt. However, that advantage is mitigated with an increase in the number of transparent rivals and in the case where more transparent players have acted as agents for an STE and have more information about costs of an STE. Further, cessation of exports under U.S. EEP programs should have decreased the transparency of U.S. firms, increasing their competitiveness in the international grain trade.

Download Info

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
File URL: http://purl.umn.edu/23403
Download Restriction: no

Bibliographic Info

Paper provided by North Dakota State University, Department of Agribusiness and Applied Economics in its series Agricultural Economics Reports with number 23403.

as in new window
Length:
Date of creation: 1999
Date of revision:
Handle: RePEc:ags:nddaer:23403

Contact details of provider:
Postal: PO Box 5636, Fargo, ND 58105-5636
Phone: (701) 231-7441
Email:
Web page: http://www.ext.nodak.edu/homepages/aedept/
More information through EDIRC

Related research

Keywords: Price Transparency; Strategic Bidding; Game Theory; Bayesian-Nash; State Trading Enterprises; Export Enhancement Program; Wheat; International Relations/Trade;

References

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
as in new window
  1. Wilson, Robert, 1992. "Strategic analysis of auctions," Handbook of Game Theory with Economic Applications, in: R.J. Aumann & S. Hart (ed.), Handbook of Game Theory with Economic Applications, edition 1, volume 1, chapter 8, pages 227-279 Elsevier.
  2. Bourgeon, Jean-Marc & Le Roux, Yves, 1996. "Tenders for European Cereal Export Refunds: A Structural Approach," European Review of Agricultural Economics, Foundation for the European Review of Agricultural Economics, vol. 23(1), pages 5-26.
  3. Hausch, Donald B & Li, Lode, 1993. "A Common Value Auction Model with Endogenous Entry and Information Acquisition," Economic Theory, Springer, vol. 3(2), pages 315-34, April.
  4. Douglas K. Reece, 1978. "Competitive Bidding for Offshore Petroleum Leases," Bell Journal of Economics, The RAND Corporation, vol. 9(2), pages 369-384, Autumn.
  5. Sexton, Richard J., 1994. "A Survey of Noncooperative Game Theory with Reference to Agricultural Markets: Part 2. Potential Applications in Agriculture," Review of Marketing and Agricultural Economics, Australian Agricultural and Resource Economics Society, vol. 62(02), August.
  6. Harsanyi, John C, 1995. "Games with Incomplete Information," American Economic Review, American Economic Association, vol. 85(3), pages 291-303, June.
  7. R. Preston McAfee & John McMillan, 1996. "Analyzing the Airwaves Auction," Journal of Economic Perspectives, American Economic Association, vol. 10(1), pages 159-175, Winter.
  8. John McMillan & Michael Rothschild & Robert Wilson, 1997. "Introduction," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 6(3), pages 425-430, 09.
  9. Hughart, David, 1975. "Informational Asymmetry, Bidding Strategies, and the Marketing of Offshore Petroleum Leases," Journal of Political Economy, University of Chicago Press, vol. 83(5), pages 969-85, October.
  10. Ryan, Timothy J., 1993. "Marketing Australia's Crop: The Way Ahead," 1993 Conference (37th), February 9-11, 1993, Sydney, Australia 147404, Australian Agricultural and Resource Economics Society.
  11. Hendricks, Kenneth & Porter, Robert H & Wilson, Charles A, 1994. "Auctions for Oil and Gas Leases with an Informed Bidder and a Random Reservation Price," Econometrica, Econometric Society, vol. 62(6), pages 1415-44, November.
  12. Wilson, Robert, 1979. "Auctions of Shares," The Quarterly Journal of Economics, MIT Press, vol. 93(4), pages 675-89, November.
  13. Hendricks, Kenneth & Porter, Robert H, 1988. "An Empirical Study of an Auction with Asymmetric Information," American Economic Review, American Economic Association, vol. 78(5), pages 865-83, December.
  14. Anderson, John D. & Ward, Clement E. & Koontz, Stephen R. & Peel, Derrell S. & Trapp, James N., 1998. "Experimental Simulation Of Public Information Impacts On Price Discovery And Marketing Efficiency In The Fed Cattle Market," Journal of Agricultural and Resource Economics, Western Agricultural Economics Association, vol. 23(01), July.
  15. Milgrom, Paul, 1989. "Auctions and Bidding: A Primer," Journal of Economic Perspectives, American Economic Association, vol. 3(3), pages 3-22, Summer.
  16. McAfee, R Preston & McMillan, John, 1987. "Auctions and Bidding," Journal of Economic Literature, American Economic Association, vol. 25(2), pages 699-738, June.
  17. Skully, David W, 1992. "Price Discrimination and State Trading: The Case of U.S. Wheat," European Review of Agricultural Economics, Foundation for the European Review of Agricultural Economics, vol. 19(3), pages 313-29.
  18. R. Preston McAfee & John McMillan, 1986. "Bidding for Contracts: A Principal-Agent Analysis," RAND Journal of Economics, The RAND Corporation, vol. 17(3), pages 326-338, Autumn.
  19. Robert B. Wilson, 1967. "Competitive Bidding with Asymmetric Information," Management Science, INFORMS, vol. 13(11), pages 816-820, July.
  20. Michael H. Rothkopf & Ronald M. Harstad, 1994. "Modeling Competitive Bidding: A Critical Essay," Management Science, INFORMS, vol. 40(3), pages 364-384, March.
  21. Uwe Latacz-Lohmann & Carel Van der Hamsvoort, 1997. "Auctioning Conservation Contracts: A Theoretical Analysis and an Application," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 79(2), pages 407-418.
Full references (including those not matched with items on IDEAS)

Citations

Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
as in new window

Cited by:
  1. Wilson, William W. & Diersen, Matthew A., 2001. "Competitive Bidding On Import Tenders: The Case Of Minor Oilseeds," Journal of Agricultural and Resource Economics, Western Agricultural Economics Association, vol. 26(01), July.
  2. Wilson, William W. & Dahl, Bruce L., 2000. "Import Tenders And Bidding Strategies In Wheat," Agricultural Economics Reports 23285, North Dakota State University, Department of Agribusiness and Applied Economics.
  3. Cheryl J. Wachenheim & Eric A. DeVuyst, 2001. "Strategic response to mandatory reporting legislation in the U.S. livestock and meat industries: Are collusive opportunities enhanced?," Agribusiness, John Wiley & Sons, Ltd., vol. 17(2), pages 177-195.

Lists

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

Statistics

Access and download statistics

Corrections

When requesting a correction, please mention this item's handle: RePEc:ags:nddaer:23403. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (AgEcon Search).

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.