A multi-attribute yardstick auction without prior scoring

TY - UNPB

T1 - A multi-attribute yardstick auction without prior scoring

AU - Hougaard, Jens Leth

AU - Nielsen, Kurt

AU - Papakonstantinou, Athanasios

N1 - MSAP Working Paper Series No. 02/2013

PY - 2013

Y1 - 2013

N2 - We analyze a simple multi-attribute procurement auction that uses yardstick competition to settle prices. Upon receiving the submitted bids, a mediator computes the yardstick prices (bids) by a linear weighting of the other participants’ bids. The auction simplifies the procurement process by reducing the principal’s articulation of his preferences to simply choosing the most preferred oer as if it was a market with posted prices.Although truthful reporting does not constitute a Nash equilibrium, we demonstrate by simulations that truth-telling may indeed be some kind of focal point. By focusing on the initial winner in case everyone tells the truth, we show that even if the other bidders are allowed to misreport by as much as 20% of their true cost, the initial winner remains the winner in 80% of all simulated auctions in the case of 3 competing bidders. Furthermore, as it takes aggressive bidding to become the new winner of the auction, we show that the new winners typically win with a loss. Combining the two results we have that, almost independently of the number of competing bidders and the degree of misreporting, approximately 90%of all simulations will either have the same initial winner or a new winner who wins the auction with a loss in its utility.

AB - We analyze a simple multi-attribute procurement auction that uses yardstick competition to settle prices. Upon receiving the submitted bids, a mediator computes the yardstick prices (bids) by a linear weighting of the other participants’ bids. The auction simplifies the procurement process by reducing the principal’s articulation of his preferences to simply choosing the most preferred oer as if it was a market with posted prices.Although truthful reporting does not constitute a Nash equilibrium, we demonstrate by simulations that truth-telling may indeed be some kind of focal point. By focusing on the initial winner in case everyone tells the truth, we show that even if the other bidders are allowed to misreport by as much as 20% of their true cost, the initial winner remains the winner in 80% of all simulated auctions in the case of 3 competing bidders. Furthermore, as it takes aggressive bidding to become the new winner of the auction, we show that the new winners typically win with a loss. Combining the two results we have that, almost independently of the number of competing bidders and the degree of misreporting, approximately 90%of all simulations will either have the same initial winner or a new winner who wins the auction with a loss in its utility.

M3 - Working paper

T3 - MSAP Working Paper Series

BT - A multi-attribute yardstick auction without prior scoring

PB - Institute of Food and Resource Economics, University of Copenhagen

ER -