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



Year of publication 2023
Type Article in Periodical
Magazine / Source The Review of Economics and Statistics
MU Faculty or unit

Faculty of Economics and Administration

Description 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.

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