Auctions for Public Construction with Corner-cutting
AbstractThis paper reports the theoretical and experimental results of auctions for public construction in which firms cut corners. We show that the winning bids and the winner's quality choices of the constructed buildings are both zero in equilibria if there are at least two firms whose initial cash balances are zero, and it is a common knowledge. The experimental results are close to the theoretical results and indicate that firms with zero-initial cash balance win and that the winning bids and the winner's quality choices of the constructed buildings are considerably low.
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Bibliographic InfoPaper provided by Institute of Social and Economic Research, Osaka University in its series ISER Discussion Paper with number 0740r.
Date of creation: May 2009
Date of revision: Jul 2010
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