Work

Bidding on Price and Quality: An Experiment on the Complexity of Scoring Rule Auctions

Year: 2023

Type: article

Abstract: We experimentally study procurement auctions when both quality and price matter. We compare two treatments where sellers compete on one dimension only (price or quality), with three treatments where sellers submit a price-quality bid and the winner is determined by a scoring rule that combines the two offers. We find that, in the scoring rule treatments, efficiency and buyer’s utility are lower than predicted. Estimates from a Quantal Response Equilibrium model suggest that increasing the dimension of the strategy space imposes a complexity burden on sellers, so that a simpler mechanism like a quality-only auction may be preferable.

Source: The Review of Economics and Statistics

DOI: 10.1162/rest_a_01288

Authors: Riccardo Camboni, Luca Corazzini, Stefano Galavotti, Paola Valbonesi