Procurement design with loss averse bidders

Arbeitspapier

We show that it is beneficial for a buyer to conduct a multi-stage mechanism if bidders are loss averse. In a first step, we derive a revenue equivalence principle. Fixing the multi-stage structure, the revenue is independent of the chosen payment rule. Secondly, we introduce a simple two-stage mechanism which always leads to a decrease in procurement costs compared to any single-stage auction. Finally we derive the optimal efficient two-stage mechanism.

Object Details

• Language: Englisch

References and Relationships

• Bibliographic citation: Series: ZEW Discussion Papers ; No. 19-060

Classification and Topics

• Classification: Wirtschaft ; Auctions ; Market Design ; Micro-Based Behavioral Economics: General‡
• Subject: Auctions ; Experiment ; Loss aversion ; Preferences

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): Fugger, Nicolas ; Gillen, Philippe ; Riehm, Tobias
• Event: Veröffentlichung
• (who): ZEW - Leibniz-Zentrum für Europäische Wirtschaftsforschung
• (where): Mannheim
• (when): 2019

Further information

• Handle: http://hdl.handle.net/10419/211482
• Last update: 10.03.2025, 11:43 AM CET