Type of Document	Dissertation
Author	Chang, Wei-Shiun
Author's Email Address	wc05d@my.fsu.edu
URN	etd-07222011-051553
Title	An Investigation into the Design of Procurement Auctions
Degree	Doctor of Philosophy
Department	Economics, Department of
Advisory Committee	Advisor Name Title Timothy Salmon Committee Chair Dmitry Ryvkin Committee Member Svetlana Pevnitskaya Committee Member Douglas Stevens University Representative
Keywords	Behavioral Economics. Experimental Economics. Proc
Date of Defense	2011-07-15
Availability	unrestricted
Abstract This dissertation examines a variety of mechanism designs adopted by industry to resolve two problematic issues in procurement auctions. Laboratory experiments are utilized to test theoretical predictions. The first essay investigates procurement auctions in a private value environment where procured goods are differentiated by unobservable characteristics. When unobservable characteristics are not taken into account in the selection process, the outcome of a procurement auction likely deviate from the buyer's optimal outcome. Three commonly used mechanisms are considered, namely standard second price auction, performance based contracting and pseudo quality screening. Bidders internalize unobservable characteristics into their bids and systematically transfer the equivalent value of those characteristics to buyers in the procurement auctions with performance based contracting. Subjects bid at their costs as predicted in the procurement auctions with pseudo quality screening and the price only mechanisms while they bid closely to their net costs in the auction with performance based contract. Experimental data has shown that the performance based contract mechanism generates higher buyer revenue than other two mechanisms do. The second essay is a test of a mechanism, average bid, used to resolve the winner's curse in a common value environment. Bidders' behavior in this mechanism is not significantly different from that in a conventional mechanism, low price. Consequently, price in the average bid mechanism is driven up and there is a reduction in the frequency of negative earnings and bankruptcy.
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