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Reputation and Mechanism Choice in Procurement Auctions – An Experiment


  • Brosig, Jeannette
  • Heinrich, Timo


We experimentally study the role of reputation in procurement using two common mechanisms: price-based and buyer-determined auctions. While buyers are bound to buy from the lowest bidder in price-based auctions, they can choose between bidders in buyer-determined auctions. Only in the latter buyers can consider the reputation of bidders. We find that bidders supply higher quality in buyer-determined auctions leading to higher market efficiencies in these auctions. Accordingly, buyers prefer the buyer-determined auction over the price-based auction, while only half of the bidders do so. A more detailed analysis of buyers' and bidders' behavior and profits provides insights into their mechanism choice.

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  • Brosig, Jeannette & Heinrich, Timo, 2011. "Reputation and Mechanism Choice in Procurement Auctions – An Experiment," Ruhr Economic Papers 254, RWI - Leibniz-Institut für Wirtschaftsforschung, Ruhr-University Bochum, TU Dortmund University, University of Duisburg-Essen.
  • Handle: RePEc:zbw:rwirep:254

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    References listed on IDEAS

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    Cited by:

    1. Heinrich, Timo & Brosig-Koch, Jeannette, 2015. "Promises and Social Distance in Buyer-Determined Procurement Auctions," Annual Conference 2015 (Muenster): Economic Development - Theory and Policy 112892, Verein für Socialpolitik / German Economic Association.
    2. Jeffrey V. Butler & Enrica Carbone & Pierluigi Conzo & Giancarlo Spagnolo, 2012. "Reputation and Entry," EIEF Working Papers Series 1215, Einaudi Institute for Economics and Finance (EIEF), revised Nov 2012.
    3. Fugger, Nicolas & Katok, Elena & Wambach, Achim, 2015. "Trust in Procurement Interactions," Annual Conference 2015 (Muenster): Economic Development - Theory and Policy 112907, Verein für Socialpolitik / German Economic Association.
    4. Stoll, Sebastian & Zöttl, Gregor, 2014. "Transparency in Buyer-Determined Auctions: Should Quality be Private or Public?," Discussion Paper Series of SFB/TR 15 Governance and the Efficiency of Economic Systems 459, Free University of Berlin, Humboldt University of Berlin, University of Bonn, University of Mannheim, University of Munich.

    More about this item


    Buyer-determined and price-based procurement; reputation information; auction choice; experimental economics;

    JEL classification:

    • D44 - Microeconomics - - Market Structure, Pricing, and Design - - - Auctions
    • C91 - Mathematical and Quantitative Methods - - Design of Experiments - - - Laboratory, Individual Behavior
    • C72 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Noncooperative Games


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