On the Timing of Auctions: The Effects of Complementarities on Bidding, Participation, and Welfare

Abstract

Large corporations, local governments, and state agencies often seek suppliers for various different contracts through a sequence of auction rounds. In these extensive procurement markets, bidders frequently participate in multiple auctions held simultaneously or in different periods, submitting bids and winning contracts. Additionally, factors such as economies of scale, capacity limitations, and overlapping work periods can cause a bidder's cost of completing multiple projects to differ from the sum of their costs for each project individually. These non-additivities, which we refer to generically as complementarities, lead to changes in bidders' relative competitiveness over time, influenced by the characteristics of both current and previously won contracts. These dynamics can impact how and for which auctions bidders ultimately decide to bid. Consequently, by strategically timing auctions across periods, the procurer can exploit these strategic effects to enhance both their own expenses and overall efficiency in the procurement process. Currently, very little is known about this aspect of procurement design.