IDEAS home Printed from https://ideas.repec.org/p/hal/journl/hal-01619040.html

Sophisticated Bidders in Beauty-Contest Auctions

Author

Listed:
  • Stefano Galavotti

    (Unipd - Università degli Studi di Padova = University of Padua)

  • Luigi Moretti,

    (CES - Centre d'économie de la Sorbonne - UP1 - Université Paris 1 Panthéon-Sorbonne - CNRS - Centre National de la Recherche Scientifique)

  • Paola Valbonesi

    (Unipd - Università degli Studi di Padova = University of Padua)

Abstract

We study bidding behavior by firms in beauty-contest auctions, i.e. auctions in which the winning bid is the one which gets closest to some function (average) of all submitted bids. Using a dataset on public procurement beauty-contest auctions, we show that firms' observed bidding behavior departs from equilibrium and can be predicted by a sophistication index, which captures the firms' capacity of bidding close to optimality in the past. We show that our empirical evidence is consistent with a Cognitive Hierarchy model of bidders' behavior. We also investigate whether and how firms learn to bid strategically through experience.

Suggested Citation

  • Stefano Galavotti & Luigi Moretti, & Paola Valbonesi, 2018. "Sophisticated Bidders in Beauty-Contest Auctions," Post-Print hal-01619040, HAL.
    • Handle: RePEc:hal:journl:hal-01619040
    DOI: 10.1257/mic.20150240
    as

    Download full text from publisher

    To our knowledge, this item is not available for download. To find whether it is available, there are three options:
    1. Check below whether another version of this item is available online.
    2. Check on the provider's web page whether it is in fact available.
    3. Perform a
    for a similarly titled item that would be available.

    Other versions of this item:

    Citations

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


    Cited by:

    1. Ottorino Chillemi & Stefano Galavotti, 2025. "Optimal procurement auctions with audit," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 79(3), pages 993-1054, May.
    2. Itzhak Rasooly, 2021. "Going... going... wrong: a test of the level-k (and cognitive hierarchy) models of bidding behaviour," Papers 2111.05686, arXiv.org.
    3. Yao, Ying & Tanaka, Makoto, 2020. "Price-quality trade-off in procurement auctions with an uncertain quality threshold," Journal of Economic Behavior & Organization, Elsevier, vol. 177(C), pages 56-70.
    4. Chiappinelli, Olga, 2020. "Decentralization and Public Procurement Performance: New Evidence from Italy," EconStor Open Access Articles and Book Chapters, ZBW - Leibniz Information Centre for Economics, vol. 58(2), pages 856-880.
    5. Laura Rondi & Paola Valbonesi, 2017. "Pre- and post-award outsourcing: Temporary partnership versus subcontracting in public procurement," "Marco Fanno" Working Papers 0211, Dipartimento di Scienze Economiche "Marco Fanno".
    6. Xiaohu Qian & Shu-Cherng Fang & Min Huang & Tiantian Nie & Xingwei Wang, 2019. "Bidding Decisions with Nonequilibrium Strategic Thinking in Reverse Auctions," Group Decision and Negotiation, Springer, vol. 28(4), pages 757-786, August.

    More about this item

    JEL classification:

    • C70 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - General
    • D01 - Microeconomics - - General - - - Microeconomic Behavior: Underlying Principles
    • D44 - Microeconomics - - Market Structure, Pricing, and Design - - - Auctions
    • D83 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Search; Learning; Information and Knowledge; Communication; Belief; Unawareness
    • H57 - Public Economics - - National Government Expenditures and Related Policies - - - Procurement

    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:hal:journl:hal-01619040. See general information about how to correct material in RePEc.

    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 bibliographic 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.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: CCSD (email available below). General contact details of provider: https://hal.archives-ouvertes.fr/ .

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

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.