The Role of Quality in Service Markets Organized as Multi-Attribute Auctions
AbstractWe develop an empirical methodology to study markets for services. These markets are typically organized as multi-attribute auctions in which buyers take into account seller's price as well as various characteristics, including quality. Our identification and estimation strategies exploit observed buyers' and sellers' decisions to recover the distribution of sellers' qualities, the distribution of seller's costs conditional on quality, and the distribution of buyers' tastes. Our empirical results from the on-line market for programming services confirm that quality plays an important role. We use our estimates to study the effect of licensing restrictions and to assess the loss of value from using standard rather than multi-attribute auctions as is common in public procurement.
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Bibliographic InfoPaper provided by Penn Institute for Economic Research, Department of Economics, University of Pennsylvania in its series PIER Working Paper Archive with number 13-053.
Length: 80 pages
Date of creation: 10 Jun 2013
Date of revision:
quality; services; licensing; procurement; multi-attribute auctions; identification; unobserved heterogeneity; unobserved buyers'tastes; participation in auctions;
Find related papers by JEL classification:
- C14 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Semiparametric and Nonparametric Methods: General
- C18 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Methodolical Issues: General
- D22 - Microeconomics - - Production and Organizations - - - Firm Behavior: Empirical Analysis
- D44 - Microeconomics - - Market Structure and Pricing - - - Auctions
- D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design
- L15 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Information and Product Quality
- L86 - Industrial Organization - - Industry Studies: Services - - - Information and Internet Services; Computer Software
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