CInSt Research Seminar "Setting reserve prices in repeated procurement auctions": Riccardo Camboni (University of Padova)

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Abstract

Using a large dataset on Russian public procurement auctions for standard gasoline over the period 2011-2013, in this paper we investigate the buyer’s setting of reserve price - i.e., the buyer’s maximum willingness to pay for the good awarded. We provide empirical evidence that previous repeated contracts between the buyer and a supplier affect the definition of reserve price in a forthcoming auction where the same supplier enters and wins. Specifically, we find that reserve price, competition and the unit winning price in the considered auction result lower than in the average auctions of our database. We conjecture that - in setting a reserve price in a new auction - public buyers exploit information they have gained on winners of previous auctions. This intuition is supported by empirically studying the reserve price in a dynamic framework, taking into account previous procurement purchasing between parts. Finally, we show that our empirical results are coherent with a simple theoretical setting in which the buyer collects information about one bidder’s costs and exploits them in setting the reserve price

Video