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Author(s): |
Ruyi Ge, College of Information and Computer Science, Shanghai Business School, Shanghai, China, 200235
Pengzhu Zhang, Antai College of Economics and Management, Shanghai Jiaotong University, Shanghai, China, 200052 |
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Abstract: |
The bidding costs in online procurement auctions for knowledge products change with the quality promised by bidders, which may cause inefficiency of procurement auctions. We prove that if the elastic coefficient of winning probability and product quality is larger than the elastic coefficient of bidding cost and product quality in a procurement auction, the auction is certainly efficient. Otherwise, auctions may be inefficient. Moreover, as long as the number of bidders is huge, auctions are always efficient. The results of the paper help buyers of knowledge products to understand when bidding costs may cause the inefficiency of online procurement auctions and in which way the problem may be solved.
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