Reputation and Mechanism Choice in Procurement Auctions: An Experiment. (17th August 2012)

• Record Type: Journal Article
• Authors: Brosig‐Koch, Jeannette; Heinrich, Timo
• Is Part Of: Production and operations management. Volume 23:Number 2(2014:Mar./Apr.)
• Page Start: 210
• Page End: 220
• Publication Date: 2012-08-17
• Subjects: Production management -- Periodicals; 658.505
• DOI: 10.1111/j.1937-5956.2012.01365.x
• Languages: English
• ISSNs: 1059-1478

Abstract

<abstract abstract-type="main" id="poms1365-abs-0001"> <title> <x xml:space="preserve">Abstract</x> </title> <p>We experimentally study the role of reputation in procurement using two common mechanisms: price‐based and buyer‐determined auctions. While buyers are bound to buy from the lowest bidder in price‐based auctions, they can choose between bidders in buyer‐determined auctions. Only the latter buyers can consider the reputation of bidders. We find that bidders supply higher quality in buyer‐determined auctions leading to higher market efficiencies in these auctions. Accordingly, buyers prefer the buyer‐determined auction over the price‐based auction, while only half of the bidders do so. A more detailed analysis of buyers' and bidders' behavior and profits provides insights into their mechanism choice.</p> </abstract>