The Effect of Shill Bidding upon Prices: Experimental Evidence

This paper explores, through a series of experiments, the effect of shill bidding upon revenues and prices in auctions. We study the practice of shill bidding in a common value framework. Our findings are consistent with the theoretical prediction that, if bidders are aware of the possibility of seller participation in an auction, shill bidding lowers profits on average. Shill bidding can alleviate the problem of the winner's curse by lowering the price and it can, thus, provide benefits to the bidders. Finally, even though there were too many bidders that submitted bids in these auctions, the number of entrants was not affected by the possibility of seller participation, which is also consistent with the theory.Auctions, Experiment, Shill Bidding, Entry

Going green: does it depend on education, gender, or income?

Sustainable development entails meeting our present needs without compromising the ability of future generations to meet their needs. This requires us to treat economic, social and environmental aspects in an integrated way, but little is known about the nature of individual preferences towards the trade-offs involved in this effort. For the first time, we study individual preferences towards the environment, social wellbeing, and financial wellbeing using a survey of over 1400 households in the Netherlands. Using nonparametric, parametric, and matching methods, we find that gender and education are important factors for sustainability rather than income levels. Moreover results indicate that educated females put the greatest value on going green whilst being socially minded.Sustainability, financial wellbeing, heterogenous preferences

Geographic concentration and firm survival

If localization economies are present, firms within denser industry concentrations should exhibit higher levels of performance than more isolated firms. Nevertheless, research in industrial organization that has focused on the influences on firm survival has largely ignored the potential effects from agglomeration. Recent studies in urban and regional economics suggests that agglomeration effects may be very localized. Analyses of industry concentration at the MSA or county-level may fail to detect important elements of intra-industry firm interaction that occur at the sub-MSA level. Using a highly detailed dataset on firm locations and characteristics for Texas, this paper analyses agglomeration effects on firm survival over geographic areas as small as a single mile radius. We find that greater firm density within very close proximity (within 1 mile) of firms in the same industry increases mortality rates while greater concentration over larger distances reduces mortality rates.Firm Survival, Agglomeration, Localization, and Knowledge Externalities

Sequential versus Simultaneous Auctioning of Procurement Contracts with Common Value and Private Value Components

We study procurement auctions held in sequential and simultaneous formats. For thelatter format, we find less bid participation and more aggressive bidding for projects withstrong common value components and more competition for projects having strong privatevalue components.microeconomics ;

Research universities and regional high-tech firm start-ups and exit

If localized knowledge spillovers are present in the university setting, higher rates of both start-ups and/or survival than in the broader economy would be observed in areas that are geographically proximate to the university. Using a fully-disclosed Quarterly Census of Employment and Wages for Texas for the years 1999:3-2006:2, this paper analyzes start-ups and exit rates for high-tech firms in Texas. We find that there is evidence that the presence of a research institution will affect the likelihood of technology start-ups. However, results suggest that geographic proximity to knowledge centers does not reduce hazard rates.Entry and Survival, R & D, Regional, Urban, and Rural Analyses

The Effect of Information on the Bidding and Survival of Entrants in Procurement Auctions

In government procurement auctions of construction contracts, entrants are typically less informed and bid more aggressively than incumbent firms. This bidding behavior makes them more susceptible to losses a¤ecting their prospect of survival. In April of 2000, the Oklahoma Department of Transportation started releasing the internal cost estimates to complete highway construction projects. Using newly developed quantile regression approaches, this paper examines the impact of the policy change on aggressive entrants. First, we find that the information release eliminates the bidding differential between entrants and incumbents attributed to informational asymmetries. Second, we argue that the policy change a¤ects the prospects of survival of entrants in the market. We find that those who used to exit the market relatively soon are now staying 37 percent longer, while at the median level bidding duration increased by roughly 68 percent. The policy has the potential to encourage entry in government procurement auctions and thus increase competition.Entry; Survival; Information Release; Procurement Auctions

What blows in with the wind?

The shift toward renewable forms of energy for electricity generation in the electricity generation industry has clear implications for the spatial distribution of generating plant. Traditional forms of generation are typically located close to the load or population centers, while wind and solar-powered generation must be located where the energy source is found. In the case of wind, this has meant significant new investment in wind plant in primarily rural areas that have been in secular economic decline. This paper investigates the localized economic impacts of the rapid increase in wind power capacity at the county level in Texas. Unlike Input-Output impact analysis that relies primarily on levels of inputs to estimate gross impacts, we use traditional econometric methods to estimate net localized impacts in terms of employment, personal income, and property tax base. While we find evidence that both direct and indirect employment impacts are modest, significant increases in per capita income accompany wind power development. County and school property tax rolls also realize important benefits from the local siting of utility scale wind power

The Impact of Public Information on Bidding in Highway Procurement Auctions

A number of papers in the theoretical auction literature show that the release of information regarding the seller’s valuation of an item can cause bidders to bid more aggressively. This widely accepted result in auction theory remains largely untested in the empirical literature. Recent theoretical work has also shown that this effect can be more pronounced in auctions with larger common cost uncertainty. We examine the impact of a policy change by the Oklahoma Department of Transportation that led to the release of the state’s internal estimate of the costs to complete highway construction projects. We perform a differences-in-differences analysis comparing bidding in Texas, a state that had a uniform policy of revealing the same information all throughout the period of analysis, to bidding in Oklahoma. Our results show that, in comparison to Texas auctions, the average bid in Oklahoma fell after the change in engineers’ cost estimate (ECE) policy. This decline in bids was even larger for projects where the common uncertainty in costs is greater. Moreover, the within-auction standard deviation of bids fell after the change in ECE policy with the most significant decline observed again in projects with greater common cost uncertainty.Information Release, Procurement Auctions

Disadvantaged business enterprise goals in government procurement contracting: an analysis of bidding behavior and costs

Programs that encourage the participation of disadvantaged business enterprises (DBE) as subcontractors have been a part of government procurement auctions for over three decades. In this paper, we examine the impact of a program that requires prime contractors to subcontract out a portion of a highway procurement project to DBE firms. We study how DBE subcontracting requirements affect bidding behavior in federally funded projects. Within a symmetric independent private value framework, we use the equilibrium bidding function to obtain the cost distribution of firms undertaking projects either with or without subcontracting goals. We then use nonparametric estimation methodsto uncover and compare the cost of firms bidding on a class of asphalt projects related to surface treatment in Texas. The analysis shows little differences in the cost structure between auctions that have subcontracting goals and those that do not.Auctions ; Government purchasing

The impact of timing on bidding behavior in procurement auctions of contracts with private costs

We provide a comparison of bidding behavior between multi-round and single-round auctions considering bid lettings for asphalt construction contracts. Using a reduced-form difference-in-difference approach as well as the nonparametric estimation technique proposed by Racine and Li (2004) we find that, bidding is more aggressive in a sequential multi-round setting than in a simultaneous single-round format. We explore potential causes for the bidding difference across formats related to synergies and level of bidder participation.Multi-unit auctions, Procurement auctions