NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH

Regulating Bidder Participation in Auctions

Vivek Bhattacharya, James W. Roberts, Andrew Sweeting

NBER Working Paper No. 19352
Issued in August 2013
NBER Program(s):   IO

Regulating bidder participation in auctions can potentially increase efficiency compared to standard auction formats with free entry. We show that the relative performance of two such mechanisms, a standard first-price auction with free entry and an entry rights auction, depends non-monotonically on the precision of information that bidders have about their costs prior to deciding whether to participate in a mechanism. As an empirical application, we estimate parameters from first-price auctions with free entry for bridge-building contracts in Oklahoma and Texas and predict that an entry rights auction increases efficiency and reduces procurement costs significantly.

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Document Object Identifier (DOI): 10.3386/w19352

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