2025/03/06 by Jun Ma, Vadim Marmer, Ma, Jun +3
Business, Management and Accounting · Decision Sciences · Economics, Econometrics and Finance · #Auction Theory and Applications #Bid price #Bid shading #Economic Policies and Impacts #Government (linguistics) #Government procurement #Procurement #Proxy bid #Public Procurement and Policy #Reverse auction #Unique bid auction
paper · pdf · doi:10.48550/arxiv.2503.03996
published in arXiv (Cornell University) (Cornell University)
openalex publication_date 2025/03/06 · openalex created_date 2025/10/10 · openalex updated_date 2026/08/05
This paper examines bid requirements, where the government may cancel a procurement contract unless two or more bids are received. Using a first-price auction model with endogenous entry, we compare the bid requirement and reserve price mechanisms in terms of auction failure and procurement costs. We find that, in comparison with bid requirements, reserve prices can reduce procurement costs and substantially lower failure probabilities, especially when entry costs are high or signals are sufficiently informative. Bid requirements are more likely to result in zero entry, while reserve prices can sustain positive entry under broader conditions.