Procuring Commodities: Request for Quote or Reverse Auctions?
AbstractWe examine the relative performances of reverse auctions and request for quotes in a simple commodity environment. Enterprises embarking on a reverse auction initiative often start with their commodity purchases. We conduct laboratory experiments and find that this is a poor starting point. Both the mean and variance of prices when sourcing through reverse auctions. With respect to the general investigation of auctions, the request for quote is the mirror image of a first price sealed bid auction and has the same symmetric Nash equilibrium. However, the request for quote allows identification of simple behavioral rules such as always bidding a percentage of your signal, which is indistinct from Nash equilibrium strategies in the sell auction counterpart. Consequently we estimate that one-fourth of the subjects follow a simple mark-up rule and approximately two-thirds follow a strategic Nash equilibrium strategy.
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Bibliographic InfoPaper provided by University Library of Munich, Germany in its series MPRA Paper with number 13418.
Date of creation: 08 Feb 2009
Date of revision:
Procurement; Auction; Experiment;
Find related papers by JEL classification:
- C92 - Mathematical and Quantitative Methods - - Design of Experiments - - - Laboratory, Group Behavior
- D44 - Microeconomics - - Market Structure and Pricing - - - Auctions
- C72 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Noncooperative Games
This paper has been announced in the following NEP Reports:
- NEP-ALL-2009-02-22 (All new papers)
- NEP-EXP-2009-02-22 (Experimental Economics)
- NEP-GTH-2009-02-22 (Game Theory)
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