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Auctioning Incentive Contracts: An Experimental Study

Author

Listed:
  • Sander Onderstal

    (University of Amsterdam)

  • Arthur Van de Meerendonk

    (Maastricht University)

Abstract

In this note, we experimentally examine the relative performance of price-only auctions and multi-attribute auctions. We do so in procurement settings where the buyer can give the winning bidder incentives to exert effort on non-price dimensions after the auction. Both auctions theoretically implement the surplus maximizing mechanism. Our experiment confirms this result. Moreover, we observe that the “pie” is shared the same in both auctions between buyer and suppliers both in theory and in the lab (after accounting for learning effects).

Suggested Citation

  • Sander Onderstal & Arthur Van de Meerendonk, 2009. "Auctioning Incentive Contracts: An Experimental Study," Tinbergen Institute Discussion Papers 09-101/1, Tinbergen Institute.
    • Handle: RePEc:tin:wpaper:20090101
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    File URL: https://papers.tinbergen.nl/09101.pdf
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    Citations

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    Cited by:

    1. Brosig, Jeannette & Heinrich, Timo, 2011. "Reputation and Mechanism Choice in Procurement Auctions – An Experiment," Ruhr Economic Papers 254, RWI - Leibniz-Institut für Wirtschaftsforschung, Ruhr-University Bochum, TU Dortmund University, University of Duisburg-Essen.
    2. Brosig-Koch, Jeannette & Heinrich, Timo & Sterner, Martin, 2023. "Bilateral communication in procurement auctions," MPRA Paper 117612, University Library of Munich, Germany.
    3. repec:zbw:rwirep:0254 is not listed on IDEAS
    4. Jeanette Brosig & Timo Heinrich, 2011. "Reputation and Mechanism Choice in Procurement Auctions – An Experiment," Ruhr Economic Papers 0254, Rheinisch-Westfälisches Institut für Wirtschaftsforschung, Ruhr-Universität Bochum, Universität Dortmund, Universität Duisburg-Essen.

    More about this item

    Keywords

    Procurement; Price-only auctions; Multi-attribute auctions; Incentive Contracts; Laboratory Experiment;
    All these keywords.

    JEL classification:

    • C91 - Mathematical and Quantitative Methods - - Design of Experiments - - - Laboratory, Individual Behavior
    • D44 - Microeconomics - - Market Structure, Pricing, and Design - - - Auctions
    • D86 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Economics of Contract Law

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