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Strategic design under uncertain evaluations : structural analysis of design-build auctions

Listed author(s):
  • Takahashi, Hidenori

I investigate firms' competition over price and product design under uncertain design evaluations in the context of Design-Build (DB) auctions. Reviewers' design evaluations contain uncertainty from a bidder's perspective, leading luck to curtail differences in firms' chances of winning. I model bidders' behavior and derive semiparametric identification of the model primitives. Uncertain evaluations worsen the expected price of design quality, and exacerbate an auctioneer's uncertainty in auction outcomes. A simple adjustment in the auction mechanism may completely shut down the impact of uncertain evaluations on bidding incentives, restoring efficient allocations of projects.

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File URL: https://ub-madoc.bib.uni-mannheim.de/38882/1/Hidenori_Takahashi_15-08.pdf
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Paper provided by University of Mannheim, Department of Economics in its series Working Papers with number 15-08.

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Date of creation: 2015
Handle: RePEc:mnh:wpaper:38882
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