Working Papers in Economics,
University of Bergen, Department of Economics

Abstract: This paper considers how price auctions compare with two-dimensional bidding on price and quality, when bidders have comparative advantages. Two-dimensional bids are evaluated by a scoring rule decided by the auctioneer and three auction types are evaluated: a) a scoring auction reflecting the auctioneer's true preferences; b) a scoring auction with 'optimal' distortion of quality in the scoring rule; and c) a price-only auction with optimal quality threshold. The main findings are: 1) while the auctioneer always prefers the scoring auction, bidders may favour the price auction to the scoring auction and vice versa, depending on underlying conditions of the type space and cost parameters; and 2) the auctioneer can exploit firms' comparative advantages to level the field. An optimal scoring auction can, in some circumstances, extract all rent from bidders, leaving the auctioneer with all the e¢ ciency gain from the bidding process. There even exists a knife-edge situation where the auctioneer can extract all rent when using his true preferences as the scoring rule.

Keywords: scoring auctions; private values; comparative advantages.

JEL-codes: D44; H57

32 pages, August 4, 2008

Full text files

wp10-08.pdf  Full text

Download statistics

• University of Bergen, Department of Economics
• Home page for this series

Questions (including download problems) about the papers in this series should be directed to Kjell Erik Lommerud ()
Report other problems with accessing this service to Sune Karlsson ().

This page generated on 2024-02-05 17:10:55.