Managing Procurement Auction Failure: Bid Requirements or Reserve Prices
Updated
Updated · arxiv.org · Jul 24
Managing Procurement Auction Failure: Bid Requirements or Reserve Prices
1 articles · Updated · arxiv.org · Jul 24
Summary
A new study finds that reserve price mechanisms in procurement auctions can reduce costs and lower the risk of auction failure compared to bid requirements.
Analysis of Texas highway maintenance auctions shows reserve prices outperform bid requirements, especially when entry costs are high or bidder signals are informative.
These findings suggest governments could benefit from using reserve prices, particularly in settings with low competition or when setting effective bid requirements is challenging.