IDEAS home Printed from https://ideas.repec.org/a/bla/randje/v45y2014i4p675-704.html
   My bibliography  Save this article

Regulating bidder participation in auctions

Author

Listed:
  • Vivek Bhattacharya
  • James W. Roberts
  • Andrew Sweeting

Abstract

type="main"> Regulating bidder participation in auctions can potentially increase efficiency compared to standard auction formats with free entry. We show that the relative performance of two such mechanisms, a standard first-price auction with free entry and an entry rights auction, depends nonmonotonically on the precision of information that bidders have about their costs prior to deciding whether to participate in a mechanism. As an empirical application, we estimate parameters from first-price auctions with free entry for bridge-building contracts in Oklahoma and Texas and predict that an entry rights auction increases efficiency and reduces procurement costs significantly.

Suggested Citation

  • Vivek Bhattacharya & James W. Roberts & Andrew Sweeting, 2014. "Regulating bidder participation in auctions," RAND Journal of Economics, RAND Corporation, vol. 45(4), pages 675-704, December.
  • Handle: RePEc:bla:randje:v:45:y:2014:i:4:p:675-704
    as

    Download full text from publisher

    File URL: http://hdl.handle.net/10.1111/1756-2171.12067
    Download Restriction: Access to full text is restricted to subscribers.

    As the access to this document is restricted, you may want to look for a different version below or search for a different version of it.

    Other versions of this item:

    References listed on IDEAS

    as
    1. Matthew Gentry & Tong Li, 2014. "Identification in Auctions With Selective Entry," Econometrica, Econometric Society, vol. 82(1), pages 315-344, January.
    2. Ye, Lixin, 2007. "Indicative bidding and a theory of two-stage auctions," Games and Economic Behavior, Elsevier, vol. 58(1), pages 181-207, January.
    3. Susan Athey & Jonathan Levin & Enrique Seira, 2011. "Comparing open and Sealed Bid Auctions: Evidence from Timber Auctions," The Quarterly Journal of Economics, Oxford University Press, vol. 126(1), pages 207-257.
    4. Elena Krasnokutskaya & Katja Seim, 2011. "Bid Preference Programs and Participation in Highway Procurement Auctions," American Economic Review, American Economic Association, vol. 101(6), pages 2653-2686, October.
    5. Lu, Jingfeng & Ye, Lixin, 2013. "Efficient and optimal mechanisms with private information acquisition costs," Journal of Economic Theory, Elsevier, vol. 148(1), pages 393-408.
    6. Daniel Ackerberg, 2009. "A new use of importance sampling to reduce computational burden in simulation estimation," Quantitative Marketing and Economics (QME), Springer, vol. 7(4), pages 343-376, December.
    7. Bajari, Patrick & Tadelis, Steven, 2001. "Incentives versus Transaction Costs: A Theory of Procurement Contracts," RAND Journal of Economics, The RAND Corporation, vol. 32(3), pages 387-407, Autumn.
    8. Patrick Bajari & Han Hong & Stephen P. Ryan, 2010. "Identification and Estimation of a Discrete Game of Complete Information," Econometrica, Econometric Society, vol. 78(5), pages 1529-1568, September.
    9. Han Hong & Matthew Shum, 2002. "Increasing Competition and the Winner's Curse: Evidence from Procurement," Review of Economic Studies, Oxford University Press, vol. 69(4), pages 871-898.
    10. Milgrom,Paul, 2004. "Putting Auction Theory to Work," Cambridge Books, Cambridge University Press, number 9780521536721, March.
    11. Hubbard, Timothy P. & Paarsch, Harry J., 2009. "Investigating bid preferences at low-price, sealed-bid auctions with endogenous participation," International Journal of Industrial Organization, Elsevier, vol. 27(1), pages 1-14, January.
    12. Li, Tong, 2010. "Indirect inference in structural econometric models," Journal of Econometrics, Elsevier, vol. 157(1), pages 120-128, July.
    13. Dakshina De Silva & Thomas Jeitschko & Georgia Kosmopoulou, 2009. "Entry and Bidding in Common and Private Value Auctions with an Unknown Number of Rivals," Review of Industrial Organization, Springer;The Industrial Organization Society, vol. 35(1), pages 73-93, September.
    14. Marmer, Vadim & Shneyerov, Artyom & Xu, Pai, 2013. "What model for entry in first-price auctions? A nonparametric approach," Journal of Econometrics, Elsevier, vol. 176(1), pages 46-58.
    15. Bulow, Jeremy & Klemperer, Paul, 1996. "Auctions versus Negotiations," American Economic Review, American Economic Association, vol. 86(1), pages 180-194, March.
    16. Susan Athey & Philip A. Haile, 2002. "Identification of Standard Auction Models," Econometrica, Econometric Society, vol. 70(6), pages 2107-2140, November.
    17. Welch, D. & Fremond, O., 1998. "The Case-by-Case Approach to Privatization. Techniques and Examples," Papers 403, World Bank - Technical Papers.
    18. Susan Athey & Dominic Coey & Jonathan Levin, 2013. "Set-Asides and Subsidies in Auctions," American Economic Journal: Microeconomics, American Economic Association, vol. 5(1), pages 1-27, February.
    19. Levin, Dan & Smith, James L, 1994. "Equilibrium in Auctions with Entry," American Economic Review, American Economic Association, vol. 84(3), pages 585-599, June.
    20. Mireia Jofre-Bonet & Martin Pesendorfer, 2003. "Estimation of a Dynamic Auction Game," Econometrica, Econometric Society, vol. 71(5), pages 1443-1489, September.
    21. Kagel, John & Pevnitskaya, Svetlana & Ye, Lixin, 2008. "Indicative bidding: An experimental analysis," Games and Economic Behavior, Elsevier, vol. 62(2), pages 697-721, March.
    22. Paul Klemperer, 2002. "What Really Matters in Auction Design," Journal of Economic Perspectives, American Economic Association, vol. 16(1), pages 169-189, Winter.
    23. Tong Li & Xiaoyong Zheng, 2009. "Entry and Competition Effects in First-Price Auctions: Theory and Evidence from Procurement Auctions," Review of Economic Studies, Oxford University Press, vol. 76(4), pages 1397-1429.
    24. Che‐Lin Su & Kenneth L. Judd, 2012. "Constrained Optimization Approaches to Estimation of Structural Models," Econometrica, Econometric Society, vol. 80(5), pages 2213-2230, September.
    25. Porter, Robert H & Zona, J Douglas, 1993. "Detection of Bid Rigging in Procurement Auctions," Journal of Political Economy, University of Chicago Press, vol. 101(3), pages 518-538, June.
    26. Samuelson, William F., 1985. "Competitive bidding with entry costs," Economics Letters, Elsevier, vol. 17(1-2), pages 53-57.
    27. Richard L. Fullerton & R. Preston McAfee, 1999. "Auctioning Entry into Tournaments," Journal of Political Economy, University of Chicago Press, vol. 107(3), pages 573-605, June.
    28. De Silva, Dakshina G. & Dunne, Timothy & Kankanamge, Anuruddha & Kosmopoulou, Georgia, 2008. "The impact of public information on bidding in highway procurement auctions," European Economic Review, Elsevier, vol. 52(1), pages 150-181, January.
    29. Steven Tadelis, 2009. "Auctions Versus Negotiations in Procurement: An Empirical Analysis," Journal of Law, Economics, and Organization, Oxford University Press, vol. 25(2), pages 372-399, October.
    30. Marmer, Vadim & Shneyerov, Art & Xu, Pai, 2010. "Supplement to "What Model for Entry in First-Price Auctions? A Nonparametric Approach"," Microeconomics.ca working papers vadim_marmer-2010-22, Vancouver School of Economics, revised 18 Feb 2011.
    31. N. Gregory Mankiw & Michael D. Whinston, 1986. "Free Entry and Social Inefficiency," RAND Journal of Economics, The RAND Corporation, vol. 17(1), pages 48-58, Spring.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Gentry, Matthew & Li, Tong & Lu, Jingfeng, 2017. "Auctions with selective entry," Games and Economic Behavior, Elsevier, vol. 105(C), pages 104-111.
    2. Bernhardt, Dan & Liu, Tingjun & Sogo, Takeharu, 2020. "Costly auction entry, royalty payments, and the optimality of asymmetric designs," Journal of Economic Theory, Elsevier, vol. 188(C).
    3. Ari Hyytinen & Sofia Lundberg & Otto Toivanen, 2018. "Design of public procurement auctions: evidence from cleaning contracts," RAND Journal of Economics, RAND Corporation, vol. 49(2), pages 398-426, June.
    4. Philip A Haile & Yuichi Kitamura, 2019. "Unobserved heterogeneity in auctions," Econometrics Journal, Royal Economic Society, vol. 22(1), pages 1-19.
    5. José-Antonio Espín-Sánchez & Álvaro Parra, 2018. "Entry Games under Private Information," Cowles Foundation Discussion Papers 2126, Cowles Foundation for Research in Economics, Yale University.
    6. Sweeting, Andrew & Bhattacharya, Vivek, 2015. "Selective entry and auction design," International Journal of Industrial Organization, Elsevier, vol. 43(C), pages 189-207.

    More about this item

    JEL classification:

    • C72 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Noncooperative Games
    • D44 - Microeconomics - - Market Structure, Pricing, and Design - - - Auctions
    • L20 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - General
    • L92 - Industrial Organization - - Industry Studies: Transportation and Utilities - - - Railroads and Other Surface Transportation

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:bla:randje:v:45:y:2014:i:4:p:675-704. 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: (Wiley Content Delivery). General contact details of provider: http://edirc.repec.org/data/randdus.html .

    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 CitEc recognized a reference but did not link an item in RePEc 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 RePEc Author Service 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.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.