The Effective Use of Limited Information: Do Bid Maximums Reduce Procurement Cost in Asymmetric Auctions?

Conservation programs faced with limited budgets often use a competitive enrollment mechanism. Goals of enrollment might include minimizing program expenditures, encouraging broad participation, and inducing adoption of enhanced environmental practices. We use experimental methods to evaluate an auction mechanism that incorporates bid maximums and quality adjustments. We examine this mechanism’s performance characteristics when opportunity costs are heterogeneous across potential participants, and when costs are only approximately known by the purchaser. We find that overly stringent maximums can increase overall expenditures, and that when quality of offers is important, substantial increases in offer maximums can yield a better quality-adjusted result.


Issue Date:
2010-04
Publication Type:
Journal Article
PURL Identifier:
http://purl.umn.edu/90850
Published in:
Agricultural and Resource Economics Review, Volume 39, Number 2
Page range:
288-304
Total Pages:
17




 Record created 2017-04-01, last modified 2017-04-04

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