IDEAS home Printed from
   My bibliography  Save this paper

An Experimental Study of Procurement Auctions with Endogenous Minimum Prices


  • Kenju Akai
  • Tatsuyoshi Saijo
  • Shigehiro Serizawa


Several European countries and many Japanese local governments began including endogenous minimum prices (EMPs) in first-price auctions (FPAs) in their public procurements. The EMP is calculated based on its relation to the average of all bids or to some lowest bids. Any bid lower than the EMP is considered abnormally low and is excluded from the procurement procedure. Producers who jointhis new auction institution have the incentive to raise their bids and pull upthe EMP in order to exclude others. A theoretical analysis reveals that the EMPdoes not affect winning bids but changes the Nash equilibria of the standard FPA that does not have any minimum prices. A laboratory analysis reveals that the winning bids of this new auction institution (i) are close to the production cost and coincide with those of the standard FPA under the identical cost conditionand(ii) are higher than the lowest production cost and those of the standard FPA under our different cost condition when subjects' identifications and bids are revealed.

Suggested Citation

  • Kenju Akai & Tatsuyoshi Saijo & Shigehiro Serizawa, 2009. "An Experimental Study of Procurement Auctions with Endogenous Minimum Prices," ISER Discussion Paper 0743r, Institute of Social and Economic Research, Osaka University, revised Jul 2010.
  • Handle: RePEc:dpr:wpaper:0743r

    Download full text from publisher

    File URL:
    Download Restriction: no

    More about this item


    Access and download statistics


    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:dpr:wpaper:0743r. 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: (Fumiko Matsumoto). General contact details of provider: .

    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.

    We have no references for this item. You can help adding them by using 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.