PACKAGE BIDS AND STAND-ALONE BIDS IN COMBINATORIAL PROCUREMENT AUCTIONS (original) (raw)
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Social Science Research Network, 2011
Combinatorial procurement auctions enable suppliers to pass their potential cost synergies on to the procuring entity and may therefore lead to lower costs and enhance efficiency. However, bidders might find it profitable to inflate their stand-alone bids in order to favour their package bids. Using data from standard and combinatorial procurement auctions, we find that bids on individual contracts in simultaneous standard auctions without the option to submit package bids are significantly lower than the corresponding stand-alone bids in combinatorial auctions. Further, no significant difference in procurer's cost as explained by auction format is found.
Joint bidding is the practice of two or more independent suppliers submitting a single bid. In Europe, the regulation of joint bidding in procurement varies a lot across countries, and is in several cases related to the inability of an individual firm to be admitted as a solo bidder. In the first part of the paper we analyse the basic economics of bidding consortia and the effects that these can have in terms of coordination among firms, risk management and exploitation of synergies. In the second part we compare several practical criteria for limiting bidding consortia in a consistent way by assessing their relative degrees of restrictiveness.
Models and Algorithms for Procurement Combinatorial Auctions
2014
A key problem in designing marketplaces is how to efficiently allocate a collection of goods amongst multiple people. Auctions have emerged as a powerful tool with the promise to increase market efficiency by allocating goods to those who value them the most. Nevertheless, traditional auctions are unable to handle real-world market complexities. Over the past decade, there has been a trend towards allowing for package bids and other types of multidimensional bidding techniques that enable suppliers to take advantage of their unique abilities and put forth their best offers. In particular the application of iterative combinatorial auctions in procurement saves negotiation costs and time. Conceptually these auctions show a potential for improving the overall market efficiency. However, in practice they host several new challenges and difficulties. One challenge facing the auctioneer in an iterative combinatorial auction environment is to quickly find an acceptable solution for each ro...
Combinatorial Auctions for Procurement: An Empirical Study of the Chilean School Meals Auction
Social Science Research Network, 2011
I n this paper we conduct an empirical investigation of a large-scale combinatorial auction (CA)-the Chilean auction for school meals in which the government procures half a billion dollars worth of meal services every year. Our empirical study is motivated by two fundamental aspects in the design of CAs: (1) which packages should bidders be allowed to bid on and (2) diversifying the supplier base to promote competition. We use bidding data to uncover important aspects of the firms' cost structure and their strategic behavior, both of which are not directly observed by the auctioneer; these estimates inform the auction design. Our results indicate that package bidding that allows firms to express their cost synergies due to economies of scale and density seems appropriate. However, we also found evidence that firms can take advantage of this flexibility by discounting package bids for strategic reasons and not driven by cost synergies. Because this behavior can lead to inefficiencies, it may be worth evaluating whether to prohibit certain specific combinations in the bidding process. Our results also suggest that market share restrictions and running sequential auctions seem to promote competition in the long run, without significantly increasing the short-run cost for the government due to unrealized cost synergies. Our results highlight that the simultaneous consideration of the firms' operational cost structure and their strategic behavior is key to the successful design of a CA. More broadly, our paper is the first to provide an econometric study of a large-scale CA, providing novel and substantive insights regarding bidding behavior in this type of auction.
Choosing Between Package and Non-Package Bidding in FCC Auctions
2019
Introduction and Summary What should be the FCC’s decision rule for determining when to use a package bidding (PB) auction and when a non-package bidding, or “simultaneous multiple round” (SMR), auction? This auction format question is important because as a result of weaknesses that each approach has, each can in certain circumstances result in license allocations that are not efficient and not in accord with the guidance of section 309(j).1 And this in turn means, of course, that the choice of auction design can affect which bidders are likely to win licenses.
Combinatorial Procurement Auctions: A Collusion Remedy?
This paper presents the outcome of an experiment where the standard one shot sealed bid procurement auction for two identical goods provides the benchmark. Inducing scale economies a combinatorial auction is applied on the situation with non-linear costs. The mechanisms are first run without, and then with the possibility for subjects to communicate prior to bidding. There are two human and one computer bidder in each period. It is demonstrated that the combinatorial mechanism is able to enhance efficiency and that subjects are less inclined to cooperate under the combinatorial auction than under the standard bidding format.
Simultaneous ascending auctions with package bidding
1998
An effective package bidding mechanism addresses three problems: the exposure problem (the risks a bidder faces in trying to construct an efficiently large combination of licenses), the freerider problem ( the difficulties small bidders have in beating those who bid for larger packages of licenses), and the computational complexity problem (which arises from the fact that the number of possible combinations of licenses is much larger than the number of licenses).