http://repub.eur.nl/res/concept/jel-D44/ Recent publications classified by JEL Code D44 en http://repub.eur.nl/static-eur/img/logo.png http://repub.eur.nl http://repub.eur.nl/res/pub/38780/ 2013-02-11T00:00:00Z In recent years, Combinatorial Clock Auctions (CCAs) have been used around the world to allocate frequency spectrum for mobile telecom licenses. CCAs are claimed to significantly reduce the scope for gaming or strategic bidding. In this paper, we show, however, that CCAs significantly enhance the possibilities for strategic bidding. Real bidders in telecom markets are not only interested in the spectrum they win themselves and the price they pay for that, but also in the price competitors pay for that spectrum. Moreover, budget constraints play an important role. When these considerations are taken into account, CCAs provide bidders with significant gaming possibilities, resulting in high auction prices and problems associated with multiple equilibria and bankruptcy (given optimal bidding strategies). Janssen, M.C.W. Karamychev, V.A. http://repub.eur.nl/res/pub/38748/ 2013-01-09T00:00:00Z We analyze the effects of mergers in first-price sealed-bid auctions on bidders' equilibrium bidding functions and on revenue. We also study the incentives of bidders to merge given the private information they have. We develop two models, depending on how after-merger valuations are created. In the first, single-aspect model, the valuation of the merged firm is the maximum of the valuations of the two firms engaged in the merger. In the multi-aspect model, a bidder's valuation is the sum of two components and a merged firm chooses the maximum of each component of the two merging firms. In the first model, a merger creates incentives for bidders to shade their bids leading to lower revenue. In the second model, the non-merging firms do not shade their bids and revenue is actually higher. In both models, we show that all bidders have an incentive to merge. Janssen, M.C.W. Karamychev, V.A. http://repub.eur.nl/res/pub/21429/ 2011-06-01T00:00:00Z There is by now a large literature arguing that auctions with a variety of after-market interactions may not yield an efficient allocation of the objects for sale, especially when the bidders impose strong negative externalities upon each other. In this note, we argue that these inefficiencies can be avoided by asking bidders prior to the auction to submit any publicly observable payment they would like to make. These payments, so-called flexible entry fees, do not affect the allocation decision of the auctioneer. We show that auctions with flexible entry fees have a fully revealing equilibrium where bidders signal their type before the auction itself takes place Janssen, M.C.W. Karamychev, V.A. Maasland, E. http://repub.eur.nl/res/pub/22739/ 2011-02-01T00:00:00Z Many organizations use procurement tenders to buy large amounts of goods and services. Especially in the public sector the use of these reverse auctions has grown rapidly over the past decades. For the (reverse) unit price auction experience as well as theory have shown that they can attract skewed/unbalanced bids, i.e. bids where the price structure is distorted to take advantage of estimation errors. This paper shows that by either allowing for some secrecy or post tender competition, incentives in unit price auction change in such a way that can make bid skewing disappear. Renes, S. http://repub.eur.nl/res/pub/20754/ 2010-07-01T00:00:00Z The Babylonian bridal auction, described by Herodotus, is regarded as one of the earliest uses of an auction in history. Yet, to our knowledge, the literature lacks a formal equilibrium analysis of this auction. We provide such an analysis for the twoplayer case with complete and incompete information, and in so doing identify what we call the "Herodotus Paradox". Baye, M.R. Kovenock, D. Vries, C.G. de http://repub.eur.nl/res/pub/20175/ 2010-06-01T00:00:00Z A simultaneous pooled auction with multiple bids and preference lists is a way to auction multiple heterogeneous objects to multiple bidders with unit demand. Bidders submit bids for every object, and a preference ordering over which object they would like to get if they have the highest bid on more than one object. This type of auction has been used in the Netherlands and in Ireland to auction available spectrum. We show that this type of auction does not satisfy elementary desirable properties such as the existence of an efficient equilibrium. Janssen, M.C.W. Karamychev, V.A. Maasland, E. http://repub.eur.nl/res/pub/17494/ 2009-11-01T00:00:00Z There is by now a large literature arguing that auctions with a variety of after-market interactions may not yield an efficient allocation of the objects for sale, especially when the bidders impose strong negative externalities upon each other. This paper argues that these inefficiencies can be avoided by asking bidders prior to the auction to submit any public payment they would like to make. These payments, so-called flexible entry fees, do not affect the allocation decision of the auctioneer. We show that auctions with flexible entry fees have a fully revealing equilibrium where bidders signal their type before the auction itself takes place. Janssen, M.C.W. Karamychev, V.A. http://repub.eur.nl/res/pub/16514/ 2009-04-01T00:00:00Z This paper presents a unified framework for characterizing symmetric equilibrium in simultaneous move, two-player, rank-order contests with complete information, in which each player's strategy generates direct or indirect affine "spillover" effects that depend on the rank-order of her decision variable. These effects arise in natural interpretations of a number of important economic environments, as well as in classic contests adapted to recent experimental and behavioral models where individuals exhibit inequality aversion or regret. We provide the closed-form solution for the symmetric Nash equilibria of this class of games, and show how it can be used to directly solve for equilibrium behavior in auctions, pricing games, tournaments, R&D races, models of ligitation, and a host of other contests. Baye, M.R. Vries, C.G. de http://repub.eur.nl/res/pub/14740/ 2009-01-01T00:00:00Z We model the emergence of organization forms in a game between prospective entrepreneurs. Complementary roles arise endogenously in a way that admits a stable assignment of workers to firms. This contrasts with existing work on job matching, where stability typically requires workers to be substitutes. Our approach demonstrates that the labor market selection of entrepreneurs and their profit-maximizing choices lead to specific technologies in which certain workers are substitutes and others are complements. We give a simple characterization of equilibrium firm memberships and organizations. We show that payoffs in our non-cooperative solution lie in the core of the corresponding cooperative game, and can be obtained in a decentralized process that reduces information and planning requirements for the entrepreneur. Roessler, C. Koellinger, Ph.D. http://repub.eur.nl/res/pub/13497/ 2008-10-10T00:00:00Z Online reverse auctions, in which a buyer seeks to select a supplier and suppliers compete for contracts by bidding online, revolutionized corporate procurement early this century. Shortly after they had been pioneered by General Electric, many companies rushed to adopt reverse auctions but the adoption soon slowed down due to the negative effects of auction-induced competition. Today, as firms continue to experiment with the reverse auctions, it is important to understand how the interplay of the auction context, the service characteristics, and buyer-supplier relationships affects auction outcomes and the success of the auctioned projects. This PhD dissertation investigates online reverse auctions in service industries (e.g. software development, building construction). The differences between services and products (services can be more difficult to describe and require more intensive communication) challenge theories that try to explain auction outcomes. We study several aspects of auctioning service contracts: the buyer’s choice between auctions and negotiations; the contract allocation decisions in auctions; the heterogeneity of buyers’ procurement behaviour; and the effect of auction outcomes on buyer-supplier relationships and project performance during the project execution. Some of the key findings are: 1) that the buyer’s repeat exchange interaction with vendors as well as the satisfaction with a vendor’s past performance lead to the buyer’s preference for using bilateral negotiation to allocate the next project; 2) that there are five buyers’ tactics that allow to increase the likelihood of contract allocation; 3) that the outcomes of online reverse auctions can aggravate project managers’ role constraints and that project managers can use relational exchange competences to overcome these constraints. Overall, buying services through online reverse auctions is quite different from buying products. This thesis makes the first steps to develop theoretical knowledge to account for that difference. Radkevitch, U.L. http://repub.eur.nl/res/pub/12871/ 2008-07-15T00:00:00Z Online markets have dramatically decreased costs of search and communication for buyers. By contrast, costs of evaluating purchasing alternatives have become critical due to an overwhelming range of available options. When high, evaluation costs can offset potential gains from transactions and cause inefficiencies, e.g. by forcing buyers to abandon transactions without allocating contracts. While most previous studies treat evaluation costs as an exoge-nous factor, this study considers them endogenous. We identify several tactics (search, request for proposal preparation, budget announcement, bid filtering, and negotiation) that buyers at online markets can use to reduce their evaluation costs and hence influence project allocation. Using data from nearly 10 thousand transactions at a leading online marketplace for IT services, we show that buyers who use these tactics are more likely to allocate their project to a winner than buyers not using these tactics. Buyer experience also has a positive effect on allocation and, in addition, moderates the effectiveness of some of the tactics. As experience grows, budget announcement be-comes more effective in coping with evaluation costs and increases the likelihood of allocation, while the effectiveness of request for proposal preparation decreases. Together, these results shed more light on the buyer side of online reverse auctions, which leads to guidelines for improving the efficiency of online marketplaces. Radkevitch, U.L. Heck, H.W.G.M. van Koppius, O.R. http://repub.eur.nl/res/pub/13676/ 2008-04-17T00:00:00Z Internet auctions attract numerous agents, but only a few become active bidders. A major difficulty in the structural analysis of internet auctions is that the number of potential bidders is unknown. Under the independent private value paradigm (IPVP)the valuations of the active bidders form a specific record sequence. This record sequence implies that if the number n of potential bidders is large, the number of active bidders is approximately 2 log n, explaining the relative inactivity. Empirical evidence for the 2 log n rule is provided. This evidence can also be interpreted as a weak test of the IPVP. Haan, L.F.M. de Vries, C.G. de Zhou, C. http://repub.eur.nl/res/pub/13672/ 2008-03-28T00:00:00Z A simultaneous pooled auction with multiple bids and preference lists is a way to auction multiple objects, in which bidders simultaneously express a bid for each object and a preference ordering over which object they would like to get in case they have the highest bid on more than one object. This type of auction has been used in the Netherlands and in Ireland to auction available spectrum. We show that this type of auction does not satisfy elementary desirable properties such as the existence of an efficient equilibrium. Janssen, M.C.W. Karamychev, V.A. Maasland, E. http://repub.eur.nl/res/pub/11288/ 2008-02-04T00:00:00Z The choice of contract allocation mechanism in procurement affects such aspects of transactions as information exchange between buyer and supplier, supplier competition, pricing and, eventually, performance. In this study we investigate the buyer’s choice between reverse auctions and bilateral negotiations as an allocation mechanism for IT services contracts. Prior studies into allocation mechanism choice focused on factors pertaining to discrete exchange situation, such as con-tract complexity or availability of suppliers. We broaden the research by focusing on buyers’ past exchange relationships with vendors. Based on the literature on the economics of contracting and agency theory, we hypothesize that prior re-peat interaction with vendors favors the use of negotiations over auctions in the next transaction, while the need to explore the marketplace due to buyer’s inexperience or dissatisfaction with vendor’s performance in the most recent project leads to the use of auctions instead of negotiations. We find support for these hypotheses in a longitudinal dataset of 2,081 IT projects realized by 91 repeat buyers at a leading online services marketplace over a period of eight years. Taken together, the results show that analyzing B2B auctions and negotiations should move beyond analyzing discrete instances and instead analyze them in the context of the individual firm’s history and supplier strategy. Radkevitch, U.L. Heck, H.W.G.M. van Koppius, O.R. http://repub.eur.nl/res/pub/11622/ 2007-05-01T00:00:00Z We demonstrate that auctioning market licenses may result in higher market prices than assigning them via more random allocation mechanisms. When future market profit is uncertain, winning an auction is like winning a lottery ticket. If firms differ in risk attitudes, auctions select the least risk-averse firm, which, in turn, set a higher price (or a higher quantity, in case quantity is the decision variable) in the marketplace than an average firm. Janssen, M.C.W. Karamychev, V.A. http://repub.eur.nl/res/pub/7903/ 2006-08-22T00:00:00Z Companies increasingly outsource IT-related tasks using reverse auction mechanisms embedded into online marketplaces. However, a considerable proportion of auctions at these marketplaces do not result in a contract between buyer and supplier. Extant literature mostly refers to costly bidding and bid evaluation to explain this phenomenon. Another possible explanation is that because of the low entry barriers, buyers with a low commitment to exchange can use the marketplace solely for information gath-ering purposes such as price benchmarking and obtaining free consultations, having little or no intention to contract a supplier. We test this explanation by looking at how different types of costs incurred by the buyer during the sourcing process, are related to the outcome of reverse auctions in terms of contract award. We argue that higher levels of search, preparation and negotiation costs are associated with higher commitment to exchange and find that opportunistic behaviour does indeed play a part in the non-contracted projects, while committed buyers are more likely to enter into a contract with a supplier. The hypotheses are tested on a sample of 2,574 reverse auctions at a leading online marketplace for IT services and further verified across projects of different value and different levels of buyer experience. On the practical side, we recommend setting up entry barriers for buyers with a low level of commitment. Radkevitch, U.L. Heck, H.W.G.M. van Koppius, O.R. http://repub.eur.nl/res/pub/6590/ 2005-03-01T00:00:00Z We study auctions in which the number of potential bidders is large, such as in Internet auctions. With numerous bidders, the expected revenue and the optimal bid function in a first price auction result in complicated expressions, except for a few simple distribution function for the bidders' valuations. We show that these expressions can be well approximated using extreme value theory without assuming a particular distribution function. The theory is applied to data from Internet auctions. Caserta, S. Vries, C.G. de http://repub.eur.nl/res/pub/6594/ 2005-02-01T00:00:00Z This paper develops one possible argument why auctioning licenses to op- erate in an aftermarket may lead to higher prices in the aftermarket compared to a more random allocation mechanism. Key ingredients in the argument are differences in firms' risk attitudes and the fact that future market prof- its are uncertain so that winning an auction is like winning a lottery ticket. li one license is auctioned, auctions select the firm that is least risk averse. This is what we call the risk attitude effect. Firms that are less risk averse tend to set higher prices (or higher quantities in case quantity is the decision variable) in the marketplace than an average firm. When multiple licenses are auctioned, this conclusion gets strengthened when there is a differenti- ated Eertrand oligopoly in the marketplace. In case of Cournot competition, a strategic effect works against the risk attitude effect so that under certain conditions the more risk averse firms will be selected leading (again) to higher market prices. Janssen, M.C.W. Karamychev, V.A. http://repub.eur.nl/res/pub/337/ 2003-05-15T00:00:00Z An increasing number of commercial companies are using online reverse auctions for their sourcing activities. In reverse auctions, multiple suppliers bid for a contract from a buyer for selling goods and/or services. Usually, the buyer has to procure multiple items, which are typically divided into lots for auctioning purposes. By steering the composition of the lots, a buyer can increase the attractiveness of its lots for thesuppliers, which can then make more competitive offers, leading to larger savings for the procuring party. In this paper, a clustering-based heuristic lotting method is proposed for reverse auctions. Agglomerative clustering is used for determining the items that will be put in the same lot. A suitable metric is defined, which allows the procurer to incorporate various approaches to lotting. The proposed lotting method has been tested for the procurement activities of a consumer packaged goods company. The results indicate that the proposed strategy leads to 2-3% savings, while the procurement experts confirm that the lots determined by the proposed method are acceptable given the procurement goals. Kaymak, U. http://repub.eur.nl/res/pub/274/ 2003-03-04T00:00:00Z The search for enablers of continued growth of SMS traffic, as well as the take-off of the more diversified MMS message contents, open up for enterprises the potential of bulk use of mobile messaging , instead of essentially one-by-one use. In parallel, such enterprises or value added services needing mobile messaging in bulk - for spot use or for use over a prescribed period of time - want to minimize total acquisition costs, from a set of technically approved providers of messaging capacity. This leads naturally to the evaluation of auctioning for bulk SMS or MMS messaging capacity, with the intrinsic advantages therein such as reduction in acquisition costs, allocation efficiency, and optimality. The paper shows, with extensive results as evidence from simulations carried out in the Rotterdam School of Management e-Auction room, how multi-attribute reverse auctions perform for the enterprise-buyer, as well as for the messaging capacity-sellers. We compare 1- and 5-round auctions, to show the learning effect and the benefits thereof to the various parties. The sensitivity will be reported to changes in the enterprise's and the capacity providers utilities and priorities between message attributes (such as price, size, security, and delivery delay). At the organizational level, the paper also considers alternate organizational deployment schemes and properties for an off-line or spot bulk messaging capacity market, subject to technical and regulatory constraints. Meij, S. Pau, L-F. Heck, H.W.G.M. van