6533b870fe1ef96bd12cfdc3
RESEARCH PRODUCT
Secret versus public reserve price in an “outcry” English procurement auction: Experimental results
Francois CochardKarine BrissetJulie Le Gallosubject
TheoryofComputation_MISCELLANEOUSEconomics and Econometrics[QFIN]Quantitative Finance [q-fin]Dutch auctionManagement Science and Operations ResearchBiddingGeneral Business Management and AccountingIndustrial and Manufacturing EngineeringRevenue equivalenceMicroeconomicsReverse auctionReservation priceOpen outcryProcurementEconomicsEnglish auctionComputingMilieux_MISCELLANEOUSdescription
Abstract In a set of human experiments, we analyze the impact of the buyer׳s reserve price policy in an online open outcry reverse auction. We measure the impact of revealing or not the reserve price on the buyer׳s expected cost when suppliers may be risk-averse. Results confirm that the optimal public reserve price policy dominates for the buyer when the lowest cost supplier is weakly risk-averse but in contrast with theory, the secret reserve price policy does not dominate when he becomes very risk-averse. Analysis of strategic suppliers׳ bidding behavior shows, in conformity with theory, that they react to the secret reserve price and are more aggressive when they are more risk-averse. This explains why the optimal public reserve price does not perform better in this context but is equivalent to the secret one. However, strongly risk-averse bidders are less aggressive than predicted by theory. That is why the secret reserve price policy does not strictly dominate.
| year | journal | country | edition | language |
|---|---|---|---|---|
| 2015-11-01 | International Journal of Production Economics |