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Studies have shown that users experience regret in online electronic auctions. Our study adds to the research on the antecedents of regret by examining the effects of the major types of auction design on users’ experience of regret. Towards this goal, we analyzed bidders’ experience of regret in English and Dutch auctions. Given that English and Dutch auctions are known to produce different types of bidding behavior and outcomes, we expect that the two types of auction design will also have a differential impact on experiencing regret. We report results from a lab experiment that was implemented as a self-developed mobile application for hotel room reservations. We examined the effects of the two open-bid auction types on the experience of regret, and found that users are more likely to experience regret in Dutch auctions. We point out the theoretical relevance and practical implications of our findings.

This paper studies an optimal procurement mechanism for a newsvendor-like problem where the buyer's (newsvendor's) purchase price of the supplies is not fixed, but determined through interaction with candidate suppliers. The buyer has priors on the suppliers' costs but does not know their costs exactly. Recent literature has shown how the buyer can implement the optimal procurement mechanism by announcing a revenue function (specifying a payment for each quantity the buyer may purchase), then auctioning off the supply contract with the specified revenue function. In this paper, we show that a simple modified version of the standard open-descending auction for a fixed quantity is also an optimal mechanism for obtaining supplies. What distinguishes this mechanism is its simplicity and familiarity for the suppliers-open-descending auctions are very easy to run and ubiquitous in practice, whereas auctioning supply contracts with a specified revenue function is much less observed and more difficult to explain to suppliers. Furthermore, we show that this simple mechanism can be easily generalized to ex ante asymmetric suppliers and a class of nonlinear production costs. This paper was accepted by Yossi Aviv, operations management.

This report assesses the potential of electricity contract auctions as a procurement option for the World Bank's client countries. It focuses on the role of auctions of electricity contracts designed to expand and retain existing generation capacity. It is not meant to be a 'how-to' manual. Rather, it highlights some major issues and options that need to be taken into account when a country considers moving towards competitive electricity procurement through the introduction of electricity auctions. Auctions have played an important role in the effort to match supply and demand. Ever since the 1990s, the use of long-term contract auctions to procure new generation capacity, notably from private sector suppliers, has garnered increased affection from investors, governments, and multilateral agencies in general, as a means to achieve a competitive and transparent procurement process while providing certainty of supply for the medium to long term. However, the liberalization of electricity markets and the move from single-buyer procurement models increased the nature of the challenge facing system planners in their efforts to ensure an adequate and secure supply of electricity in the future at the best price. While auctions as general propositions are a means to match supply with demand in a cost-effective manner, they can also be and have been used to meet a variety of goals.

Orientation: This article is related to Finances and Optimisation. The auctioneer designs every auction mechanism such that utility is maximised and cost is minimised. Research purpose: This article proposes an optimal auction mechanism through which auctioneers can assign fairly and efficiently assets to the highest bidders and maximise utility and/or minimise cost. Motivation for the study: One of the tasks of my PhD was about spectrum auction from which I got a vision to design mathematical models and related computational simulations for any asset underlying an auction. Research approach/design and method: Firstly, a study was conducted to model the way auctioneers could analyse and estimate bidders’ (buyers’) valuations, and then, accordingly, set the prices of the underlying assets or services. An open ascending-bid auction mechanism was also considered. Finally, a first-price sealed-bid auction mechanism for utility maximisation and cost minimisation is investigated. Main findings: The substantive contribution of this article is in the set of mathematical models and computational simulations designed and proposed for the bidders’ valuations and the considered open ascending-bid auction. For the investigated first-price sealed-bid auction mathematical models are developed in terms of a combinatorial optimisation problem. The formula computing the expected utility for the auctioneer was designed. Practical/managerial implications: The research provides rigorous ways for optimal auction design to auctioneers and any financial operators or managers. Contribution/value-add: The contributions are in the set of mathematical models and computational simulations. This article models the optimal auction design strategy mechanism as a combinatorial optimisation problem.

We study a dynamic auction mechanism in the context of private provision of a discrete public good under incomplete information. The bidders have private valuations, and the cost of the public good is common knowledge. No bidder is willing to provide the good on her own. We show that a natural application of open ascending auctions in such environments fails dramatically: The probability of provision is zero in any equilibrium. The mechanism effectively auctions off the ‘right’ to be the last one to contribute, but intuition suggests that neither player wishes to be the last one to contribute. Since the player who contributes first has the advantage of being able to free ride on the contributions of the other players, no player wants to ‘win’ the auction.

Land-based financing of urban infrastructure is growing in importance in the developing world. Why is it so difficult to finance urban infrastructure investment, when land values typically increase by more than the cost of investment? 'Unlocking Land Values to Finance Urban Infrastructure' examines the theory underlying different instruments of land-based finance, such as betterment levies, developer exactions, impact fees, and the exchange of publicly owned land assets for infrastructure. It provides a wealth of case-study illustrations of how different land-based financing tools have been implemented, and the lessons learned from these experiences. This practical guide is designed to help expand the role of land-based financing in urban capital budgets in a way that strengthens urban infrastructure finance and urban land markets.

Online open-cry auctions have become popular. Because of the inevitable delay of the communication between the auctioneer and bidders, the current form of online open-cry auctions is not fully equivalent to traditional face-to-face real-time open-cry auctions. This disadvantage of online open-cry auctions destructs the auction mechanism. This study proposes a synchronous online open-cry auction model. In this paper, the protocol for the synchronization of online open-cry auctions that supports activities leading to the effectiveness of auctions is examined. A prototype of the synchronous open-cry auction model, which is built with Java servlets, is further discussed.

The Revenue Equivalence Theorem states that when each auction bidder's reservation price for a unit of an indivisible good is an independent draw from the same distribution, and bidders are risk-neutral, the sealed-bid auction produces the same expected revenue as the open auction. Many recent studies have involved weakening each of the chief hypotheses - risk neutrality, identically distributed values, and independence of values - in turn. Some of the main conclusions of this work are illustrated by considering the attributes of open and sealed-bid auctions in a model of 2 bidders whose reservation prices can assume only 2 values, and by comparing these auctions to the ''optimal,'' or revenue-maximizing, auction. Under these conditions, the Revenue Equivalence Theorem fails.

Online labor markets are Web-based platforms that enable buyers to identify and contract for information technology (IT) services with service providers using buyer-determined (BD) auctions. BD auctions in online labor markets either follow an open or a sealed bid format. We compare open and sealed bid auctions in online labor markets to identify which format is superior in terms of obtaining more bids and a higher buyer surplus. Our theoretical analysis suggests that the relative advantage of open versus sealed bid auctions hinges on the role of reducing service providers’ valuation uncertainty (difficulty in assessing the cost to execute a project) and competition uncertainty (difficulty in assessing the intensity of the competition from other service providers), which largely depend on the relative importance of the common value (versus the private value) component of the auctioned IT services, calling for an empirical investigation to compare open and sealed bid auctions. Based on a unique data set of 71,437 open bid auctions and 7,499 sealed bid auctions posted by 21,799 buyers at a leading online labor market, we find that, on average, although sealed bid auctions attract 18.4% more bids, open bid auctions offer buyers $10.87 higher surplus. Furthermore, open bid auctions are 55.3% more likely to result in a buyer’s selection of a certain service provider and 22.1% more likely to reach a contract (conditional on the buyer’s making a selection) with a provider, and they generate higher buyer satisfaction. In contrast to conventional wisdom that “the more bids the better” and industry practice of treating sealed bid auctions as a premium feature, our results suggest that the buyer surplus gained from the reduction in valuation uncertainty enabled by open bid auctions outweighs the buyer surplus gained from the higher competition uncertainty in sealed bid auctions, which renders open bid auctions a superior auction design in online labor markets.