Advanced Search
MyIDEAS: Login to save this paper or follow this series

Tenders with Different Risk Preferences in Construction Industry

Contents:

Author Info

  • Fangcheng Tang

    ()
    (School of Economics and Management, Tsinghua University)

  • Weizhou Zhong

    ()
    (School of Economics and Finance, Xi'an Jiaotong University)

  • Shunfeng Song

    ()
    (Department of Economics, University of Nevada, Reno)

Abstract

Underlying the fact that different tenderers have different preferences on risk-taking, this study investigates the different tenderers' behaviors in one-shot construction bid auctions. Our model extends the preconditions of previous assumption that all tenderers are characterized by neutral risk-taking in the original tendering model for lowest-price sealed tender. A general tendering model for the lowest-price sealed tender is established to explain the behavior of tenderers during the tendering. The results indicate that construction estimate is affected by the degree of uncertainties in the construction industry. Therefore, in a lowest-price sealed tender, risk-averse tenders would tender a higher price and conversely risk-seeking tenderers would tender a lower price when risk-neutral tenderers would tender a middle price. However, the risk-seeking tenderers are more likely to win the bid.

Download Info

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
File URL: http://www.business.unr.edu/econ/wp/papers/UNRECONWP06006.pdf
File Function: First version, 2006
Download Restriction: no

Bibliographic Info

Paper provided by University of Nevada, Reno, Department of Economics & University of Nevada, Reno , Department of Resource Economics in its series Working Papers with number 06-006.

as in new window
Length: 20 pages
Date of creation: Dec 2006
Date of revision:
Handle: RePEc:unr:wpaper:06-006

Contact details of provider:
Postal: Mail Stop 030, Reno, NV 89557-0207
Phone: (775) 784-6450
Fax: (775) 784-4728
Web page: http://www.business.unr.edu/econ/
More information through EDIRC

Web page: http://www.cabnr.unr.edu/re/
More information through EDIRC

Related research

Keywords: Auction; tender; uncertainty; preference; construction industry;

Find related papers by JEL classification:

This paper has been announced in the following NEP Reports:

References

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
as in new window
  1. Péter Esö & Lucy White, 2004. "Precautionary Bidding in Auctions," Econometrica, Econometric Society, vol. 72(1), pages 77-92, 01.
  2. Douglas Dyer & John Kagel, 1996. "Bidding in common value auctions: How the commercial construction industry corrects for the winner's curse," Framed Field Experiments 00144, The Field Experiments Website.
  3. Paul Klemperer, 1997. "Auctions with Almost Common Values: The Wallet Game and its Applications," Economics Series Working Papers 1998-W03, University of Oxford, Department of Economics.
  4. McAfee, R. Preston & McMillan, John, 1987. "Auctions with a stochastic number of bidders," Journal of Economic Theory, Elsevier, vol. 43(1), pages 1-19, October.
  5. Moore, John, 1984. "Global Incentive Constraints in Auction Design," Econometrica, Econometric Society, vol. 52(6), pages 1523-35, November.
  6. Samuelson, William F., 1985. "Competitive bidding with entry costs," Economics Letters, Elsevier, vol. 17(1-2), pages 53-57.
  7. Matthews, Steven, 1987. "Comparing Auctions for Risk Averse Buyers: A Buyer's Point of View," Econometrica, Econometric Society, vol. 55(3), pages 633-46, May.
  8. Paul Klemperer, 1999. "Auction Theory: A Guide to the Literature," Microeconomics 9903002, EconWPA.
  9. Hausch, Donald B & Li, Lode, 1993. "A Common Value Auction Model with Endogenous Entry and Information Acquisition," Economic Theory, Springer, vol. 3(2), pages 315-34, April.
  10. Keith Waehrer & Ronald M. Harstad & Michael H. Rothkopf, 1998. "Auction Form Preferences of Risk-Averse Bid Takers," RAND Journal of Economics, The RAND Corporation, vol. 29(1), pages 179-192, Spring.
  11. Maskin, Eric S & Riley, John G, 1984. "Optimal Auctions with Risk Averse Buyers," Econometrica, Econometric Society, vol. 52(6), pages 1473-1518, November.
  12. Steven A. Matthews, 1981. "Selling to Risk Averse Buyers with Unobservable Tastes," Discussion Papers 480S, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
  13. Matthews, Steven A, 1984. "On the Implementability of Reduced Form Auctions," Econometrica, Econometric Society, vol. 52(6), pages 1519-22, November.
  14. Jacob K. Goeree & Theo Offerman, 1999. "Competitive Bidding in Auctions with Private and Common Values," Virginia Economics Online Papers 337, University of Virginia, Department of Economics.
  15. Levin, Dan & Smith, James L, 1994. "Equilibrium in Auctions with Entry," American Economic Review, American Economic Association, vol. 84(3), pages 585-99, June.
  16. Milgrom, Paul R & Weber, Robert J, 1982. "A Theory of Auctions and Competitive Bidding," Econometrica, Econometric Society, vol. 50(5), pages 1089-1122, September.
  17. Milgrom, Paul, 1989. "Auctions and Bidding: A Primer," Journal of Economic Perspectives, American Economic Association, vol. 3(3), pages 3-22, Summer.
  18. Jacob K. Goeree & Theo Offerman, 2000. "Efficiency in Auctions with Private and Common Values: An Experimental Study," Tinbergen Institute Discussion Papers 00-045/1, Tinbergen Institute.
  19. McAfee, R Preston & McMillan, John, 1987. "Auctions and Bidding," Journal of Economic Literature, American Economic Association, vol. 25(2), pages 699-738, June.
  20. Michael H. Rothkopf & Ronald M. Harstad, 1994. "Modeling Competitive Bidding: A Critical Essay," Management Science, INFORMS, vol. 40(3), pages 364-384, March.
  21. Bernard Caillaud & Philippe Jehiel, 1998. "Collusion in Auctions with Externalities," RAND Journal of Economics, The RAND Corporation, vol. 29(4), pages 680-702, Winter.
  22. Laffont, Jean-Jacques, 1997. "Game theory and empirical economics: The case of auction data 1," European Economic Review, Elsevier, vol. 41(1), pages 1-35, January.
  23. George Deltas & Richard Engelbrecht-Wiggans, 2005. "Naive Bidding," Management Science, INFORMS, vol. 51(3), pages 328-338, March.
  24. Harstad, Ronald M. & Kagel, John H. & Levin, Dan, 1990. "Equilibrium bid functions for auctions with an uncertain number of bidders," Economics Letters, Elsevier, vol. 33(1), pages 35-40, May.
  25. Smith, James L. & Levin, Dan, 1996. "Ranking Auctions with Risk Averse Bidders," Journal of Economic Theory, Elsevier, vol. 68(2), pages 549-561, February.
Full references (including those not matched with items on IDEAS)

Citations

Lists

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

Statistics

Access and download statistics

Corrections

When requesting a correction, please mention this item's handle: RePEc:unr:wpaper:06-006. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Mehmet Tosun).

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.