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Rational bidding in a procurement auction with subjective evaluations

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  • Goswami, Mridu Prabal
  • Wettstein, David

Abstract

In practice, procurement auctions often involve subjective evaluations of bids, especially when consisting of quality or design parameters which are hard to quantify. We formally define a notion of subjectivity in an auction environment and analyze the implications for rational bidding behavior. Our findings explain some observed bidding behaviors that are inconsistent with standard equilibrium predictions. Finally we examine the way subjectivity facilitates the practice of favoritism on part of the auctioneer.

Suggested Citation

  • Goswami, Mridu Prabal & Wettstein, David, 2016. "Rational bidding in a procurement auction with subjective evaluations," International Journal of Industrial Organization, Elsevier, vol. 44(C), pages 60-67.
    • Handle: RePEc:eee:indorg:v:44:y:2016:i:c:p:60-67
    DOI: 10.1016/j.ijindorg.2015.10.001
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    References listed on IDEAS

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    Cited by:

    1. Riccardo Camboni Marchi Adani & Paola Valbonesi, 2016. "Favouritism in scoring rule auctions," "Marco Fanno" Working Papers 0210, Dipartimento di Scienze Economiche "Marco Fanno".

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    More about this item

    Keywords

    Procurement auctions; Subjectivity; Favoritism;
    All these keywords.

    JEL classification:

    • D44 - Microeconomics - - Market Structure, Pricing, and Design - - - Auctions
    • D89 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Other
    • H57 - Public Economics - - National Government Expenditures and Related Policies - - - Procurement

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