Stochastic Synergies in Sequential Auctions
42 Pages Posted: 12 Nov 2004
Date Written: November 2004
We consider sequential construction contracts in which bidders may benefit from one auction to the next due to synergistic tasks across the projects auctioned. Theoretical considerations indicate that winners in the former auctions are more likely to participate in latter auctions. Moreover, conditional on participation, past winners place lower bids, on average, and are so more likely to win in later auctions. We present evidence in support of these predictions using sequential construction auctions conducted by the Oklahoma Department of Transportation.
Keywords: Sequential auctions, synergies, multi-unit auctions, procurement auctions
JEL Classification: D44
Suggested Citation: Suggested Citation