IDEAS home Printed from https://ideas.repec.org/a/taf/applec/v56y2024i60p9407-9421.html
   My bibliography  Save this article

Bid evaluation with distortionary scaling in multidimensional procurement auctions

Author

Listed:
  • Sungyee Kim

Abstract

Construction projects are often procured through multidimensional auctions, in which suppliers bid on both price and non-price attributes such as quality. In Korea, a unique scaling method is employed to differentiate bids, adjusting scores to ensure a sufficient point difference between adjacent quality bids. This scaling method aims to enhance the discriminating power of the scoring system and attract more sophisticated project designs. However, it may distort overall bid rankings and lead to inefficient contract allocation. The added uncertainty may incentivize suppliers to inflate their prices, as the effect of price on winning probability decreases with the scaling factor. Using Korean procurement data, I analyse cases of rank reversal, and I reveal a tendency among suppliers to bid less aggressively on price when quality differences are magnified, with the effect varying with the level of uncertainty in bid evaluation. This highlights the preference of buyers for a less distortionary scoring system to enhance the value of procurement.

Suggested Citation

  • Sungyee Kim, 2024. "Bid evaluation with distortionary scaling in multidimensional procurement auctions," Applied Economics, Taylor & Francis Journals, vol. 56(60), pages 9407-9421, December.
  • Handle: RePEc:taf:applec:v:56:y:2024:i:60:p:9407-9421
    DOI: 10.1080/00036846.2024.2402951
    as

    Download full text from publisher

    File URL: http://hdl.handle.net/10.1080/00036846.2024.2402951
    Download Restriction: Access to full text is restricted to subscribers.

    File URL: https://libkey.io/10.1080/00036846.2024.2402951?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    More about this item

    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:taf:applec:v:56:y:2024:i:60:p:9407-9421. 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: Chris Longhurst (email available below). General contact details of provider: http://www.tandfonline.com/RAEC20 .

    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.