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Auctions for Public Construction with Corner-cutting

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  • Kenju Akai
  • Shigehiro Serizawa

Abstract

This paper reports the theoretical and experimental results of auctions for public construction in which firms cut corners. We show that the winning bids and the winner's quality choices of the constructed buildings are both zero in equilibria if there are at least two firms whose initial cash balances are zero, and it is a common knowledge. The experimental results are close to the theoretical results and indicate that firms with zero-initial cash balance win and that the winning bids and the winner's quality choices of the constructed buildings are considerably low.

Suggested Citation

  • Kenju Akai & Shigehiro Serizawa, 2009. "Auctions for Public Construction with Corner-cutting," ISER Discussion Paper 0740r, Institute of Social and Economic Research, Osaka University, revised Jul 2010.
    • Handle: RePEc:dpr:wpaper:0740r
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    File URL: https://www.iser.osaka-u.ac.jp/library/dp/2009/DP0740R.pdf
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    References listed on IDEAS

    as
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