Scoring Rules in Experimental Procurement

Abstract

We report the results of a procurement experiments where subjects compete for procurement contracts to be awarded by means of a scoring auction. Two experimental conditions are considered, depending on the relative quality-price weight in the scoring rule. We show that different quality-price weights in the scoring rule dramatically alter the strategic environment and affect the extent to which the competitive mechanism leads to an efficient allocation of the contract. Our evidence suggests that, in spite of inducing significantly higher deviations from equilibrium, the scoring rule that gives more weight to quality over price is far more efficient (52% overall). We propose a “mediation analysis” to explain how the quality-price ratio determines the likelihood that an efficient allocation is realized, disentangling a “direct effect” (due to the equilibrium different properties of the induced game-forms) from an “indirect” one (how the different game-forms affect out-of- equilibrium behaviour).

Keywords: Scoring Auctions, Mechanism Design, Experimental Economics

JEL Classification: C91, D70, D81, D91