IDEAS home Printed from https://ideas.repec.org/a/spr/cejnor/v14y2006i3p299-311.html
   My bibliography  Save this article

Constrained equilibrium in a bidding problem

Author

Listed:
  • James Falk

    ()

  • Jana Hranaiova

    ()

  • Harry Gorter

    ()

Abstract

There are a number of situations where firms vie for some constrained total quantity by bidding individual quantities but where the allocation is determined on a ‘pro-rated’ basis. One such example is a licenses-on-demand method of import quota allocation. Bidders are constrained to bid at most the total quantity, and if the sum of all bids exceeds this total, the awards are granted proportional to the fractional amounts that the bidders request. In this note, we identify the (Nash) equilibrium of the model, present some examples, and do a sensitivity analysis of the bids as the total amount available changes. We also look into changes of the bids when a new participant enters the bidding process. In an economic context, such allocation methods are shown to be biased in favor of the least efficient firms. Copyright Physica-Verlag 2006

Suggested Citation

  • James Falk & Jana Hranaiova & Harry Gorter, 2006. "Constrained equilibrium in a bidding problem," Central European Journal of Operations Research, Springer;Slovak Society for Operations Research;Hungarian Operational Research Society;Czech Society for Operations Research;Österr. Gesellschaft für Operations Research (ÖGOR);Slovenian Society Informatika - Section for Operational Research;Croatian Operational Research Society, vol. 14(3), pages 299-311, September.
  • Handle: RePEc:spr:cejnor:v:14:y:2006:i:3:p:299-311
    DOI: 10.1007/s10100-006-0006-7
    as

    Download full text from publisher

    File URL: http://hdl.handle.net/10.1007/s10100-006-0006-7
    Download Restriction: Access to full text is restricted to subscribers.

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

    References listed on IDEAS

    as
    1. Skully, David W., 2001. "Economics of Tariff-Rate Quota Administration," Technical Bulletins 184332, United States Department of Agriculture, Economic Research Service.
    2. Jana Hranaiova & Harry de Gorter & James Falk, 2006. "The Economics of Administering Import Quotas with Licenses-on-Demand in Agriculture," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 88(2), pages 338-350.
    3. Skully, David W., 2001. "Economics Of Tariff-Rate Quota Administration," Technical Bulletins 33576, United States Department of Agriculture, Economic Research Service.
    Full references (including those not matched with items on IDEAS)

    More about this item

    Keywords

    Constrained equilibrium; Quantity bidding; Prorated distribution; Nash equilibrium; Licenses-on-demand; C70;

    JEL classification:

    • C70 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - General

    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:spr:cejnor:v:14:y:2006:i:3:p:299-311. 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: (Sonal Shukla) or (Rebekah McClure). General contact details of provider: http://www.springer.com .

    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.