Technical Note - Bidding in Multidimensional Auctions When the Qualities of All Bidders Matter

Measuring the “True” Quality by Rival Bidder Qualities in Score Auctions In a procurement auction, where price and quality are evaluated by a score, the assessment criteria partially account for the “true” quality offered. The joint information of all the bids can increase the reliability of the measurement process of quality, giving better accuracy of estimation compared with the reported quality. In “Technical Note―Bidding in Multidimensional Auctions When the Qualities of All Bidders Matter,” Lorentziadis examines auctions where the score is adjusted by the qualities of all bidders, who exhibit different production efficiencies and additive separable costs. At equilibrium, the total procurement cost remains the same in the first-score and the second-score auctions. For different adjustments of the score—for example, using a weighted average of all the qualities—we find that the standard unadjusted score auction brings the highest total project cost to the buyer. Procurement managers should give consideration to score rules that account for all bidder qualities.