Note on Online Auctions with Costly Bid Evaluation

As seen in the data of Snir and Hitt (2003), online service procurement auctions often end without achieving a contract despite active bidding, yet the existing auction literature is silent on why this occurs. One explanation for these unconsummated auctions may be that perfectly acceptable bids are...

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Bibliographic Details
Published in:Management science 2003-11, Vol.49 (11), p.1521-1528
Main Author: Carr, Scott M
Format: Article
Language:English
Subjects:
Auctions
Bidding
Bids
Business studies
Competition
Contracts
Cost efficiency
Costs
Electronic commerce
Electronic Market
Equilibrium
Evaluation
Evaluation Cost
Fixed costs
Hypotheses
Implicit costs
Internet
Mathematical functions
Mathematical intervals
Mathematical vectors
Objective functions
Online auctions
Optimization
Profits
Reverse Auctions
Software
Software Contracts
Studies
Vendors
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Summary:As seen in the data of Snir and Hitt (2003), online service procurement auctions often end without achieving a contract despite active bidding, yet the existing auction literature is silent on why this occurs. One explanation for these unconsummated auctions may be that perfectly acceptable bids are submitted but disregarded because of the cost of assessing the bids' viability and the bidders' capabilities. This note examines this possibility by characterizing optimal and equilibrium bidding and bid-evaluation decisions in the presence of these costs.
ISSN:0025-1909
1526-5501
DOI:10.1287/mnsc.49.11.1521.20581