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Secret versus public reserve price in an “outcry” English procurement auction: Experimental results

Author

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  • Julie Le Gallo

    (CRESE - Centre de REcherches sur les Stratégies Economiques (UR 3190) - UFC - Université de Franche-Comté - UBFC - Université Bourgogne Franche-Comté [COMUE])

  • Karine Brisset

    (CRESE - Centre de REcherches sur les Stratégies Economiques (UR 3190) - UFC - Université de Franche-Comté - UBFC - Université Bourgogne Franche-Comté [COMUE])

  • Francois Cochard

    (CRESE - Centre de REcherches sur les Stratégies Economiques (UR 3190) - UFC - Université de Franche-Comté - UBFC - Université Bourgogne Franche-Comté [COMUE])

Abstract

In a set of human experiments, we analyze the impact of the buyer׳s reserve price policy in an online open outcry reverse auction. We measure the impact of revealing or not the reserve price on the buyer׳s expected cost when suppliers may be risk-averse. Results confirm that the optimal public reserve price policy dominates for the buyer when the lowest cost supplier is weakly risk-averse but in contrast with theory, the secret reserve price policy does not dominate when he becomes very risk-averse. Analysis of strategic suppliers׳ bidding behavior shows, in conformity with theory, that they react to the secret reserve price and are more aggressive when they are more risk-averse. This explains why the optimal public reserve price does not perform better in this context but is equivalent to the secret one. However, strongly risk-averse bidders are less aggressive than predicted by theory. That is why the secret reserve price policy does not strictly dominate.
(This abstract was borrowed from another version of this item.)

Suggested Citation

  • Julie Le Gallo & Karine Brisset & Francois Cochard, 2015. "Secret versus public reserve price in an “outcry” English procurement auction: Experimental results," Post-Print hal-03282276, HAL.
    • Handle: RePEc:hal:journl:hal-03282276
    DOI: 10.1016/j.ijpe.2015.07.033
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    Cited by:

    1. Omar Abbaas & Jose A. Ventura, 2024. "An Iterative Procurement Combinatorial Auction Mechanism for the Multi-Item, Multi-Sourcing Supplier-Selection and Order-Allocation Problem under a Flexible Bidding Language and Price-Sensitive Demand," Mathematics, MDPI, vol. 12(14), pages 1-30, July.
    2. Aijun Liu & Yaxuan Xiao & Zengxian Li & Ruiyao Wang, 2022. "An agent‐based multiattribute reverse auction approach for online secondhand commodities," Managerial and Decision Economics, John Wiley & Sons, Ltd., vol. 43(1), pages 129-145, January.

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