Reputation and Mechanism Choice in Procurement Auctions – An Experiment
AbstractWe experimentally study the role of reputation in procurement using two common mechanisms: price-based and buyer-determined auctions. While buyers are bound to buy from the lowest bidder in price-based auctions, they can choose between bidders in buyer-determined auctions. Only in the latter buyers can consider the reputation of bidders. We find that bidders supply higher quality in buyer-determined auctions leading to higher market efficiencies in these auctions. Accordingly, buyers prefer the buyer-determined auction over the price-based auction, while only half of the bidders do so. A more detailed analysis of buyers’ and bidders’ behavior and profits provides insights into their mechanism choice.
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Bibliographic InfoPaper provided by Rheinisch-Westfälisches Institut für Wirtschaftsforschung, Ruhr-Universität Bochum, Universität Dortmund, Universität Duisburg-Essen in its series Ruhr Economic Papers with number 0254.
Length: 35 pages
Date of creation: Apr 2011
Date of revision:
Find related papers by JEL classification:
- D44 - Microeconomics - - Market Structure and Pricing - - - Auctions
- C91 - Mathematical and Quantitative Methods - - Design of Experiments - - - Laboratory, Individual Behavior
- C72 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Noncooperative Games
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