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Procurement Bidding in First-Price and Second-Price Sealed Bid Common Value Auctions

Author

Listed:
  • Lunander, A.

Abstract

Within the framework of the common value model, we examine the magnitude of the difference in expected outcome between first-price and second-price sealed bid auctions. The study is limited to two empirical specifications of bidders' signals: Weibull and normal distribution. The optimal bid functions and the expected procurer' s cost under both auction formats are derived. Simulations are undertaken to analyze the impact that random draws of signals have on the differences in outcome from the two auction formats. Using estimates from structural estimation in previous empirical work on first-price auction data, where Weibull and normal distributions of signals have been applied, the hypothetical expected gain from switching from a first-price sealed bid auction to a second-price sealed bid auction mechanism is computed.

Suggested Citation

  • Lunander, A., 1999. "Procurement Bidding in First-Price and Second-Price Sealed Bid Common Value Auctions," Papers 1999:17, Uppsala - Working Paper Series.
    • Handle: RePEc:fth:uppaal:1999:17
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    More about this item

    Keywords

    AUCTIONS;

    JEL classification:

    • D44 - Microeconomics - - Market Structure, Pricing, and Design - - - Auctions

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