Experiments in Public Procurement

Riccardo Camboni presented a joint paper "Bidding on Price and Quality: An Experiment on the Complexity of Scoring Auctions" on the regular online CInSt research seminar on 23th April

The authors run an experiment on procurement auctions in a setting where both quality and price matter. They compare two unidimensional treatments in which the buyer fixes one dimension (quality or price) and sellers compete on the other, with three bidimensional treatments (with different strategy spaces) in which sellers submit a price-quality bid and the winner is determined by a score that linearly combines the two offers.

The authors find that the bidimensional treatments significantly underperform, both in terms of efficiency and buyer’s utility. They find very similar estimates for the risk aversion parameter across all treatments; instead, the error parameter, which captures deviations between the observed bids and the payoff-maximizing ones, is larger in the bidimensional treatments than in the unidimensional ones. The evidence suggests that increasing the dimensionality and the size of the suppliers’ strategy space increases their tendency to make suboptimal offers, thus undermining the theoretical superiority of more complex mechanisms.

Please, watch the seminar here.