Please use this identifier to cite or link to this item: http://hdl.handle.net/10397/34462
Title: Testing Vickery's revenue equivalence theory in construction auctions
Authors: Drew, DS
Skitmore, M
Keywords: Bids
Contracts
Construction industry
Pricing
Issue Date: 2006
Publisher: American Society of Civil Engineers
Source: Journal of construction engineering and management, 2006, v. 132, no. 4, p. 425-428 How to cite?
Journal: Journal of construction engineering and management
Abstract: Construction work is often allocated to contractors via first price sealed bid auctions (FPA). American Nobel Prize winner and economist William Vickery, however, suggested that second price auctions (SPA) (i.e., the lowest bidder wins the contract at the second lowest price) may be more beneficial due to the revenue equivalence theory (RET). This implies that, upon certain conditions being met, clients can, in the long run, expect to pay approximately the same to contractors irrespective of whether contracts are awarded according to an FPA or SPA. At the same time, it is expected to be easier to bid in an SPA. In the absence of real world data, the likely effects of using SPA for construction were examined experimentally. This involved experienced respondents bidding on over 60 identical FPA and SPA. Contrary to expectations, the bids for the SPA were significantly higher, indicating that RET is unlikely to occur in practice in construction bidding.
URI: http://hdl.handle.net/10397/34462
ISSN: 0733-9364 (print)
1943-7862 (online)
DOI: 10.1061/(ASCE)0733-9364(2006)132:4(425)
Appears in Collections:Journal/Magazine Article

Access
View full-text via PolyU eLinks SFX Query
Show full item record

WEB OF SCIENCETM
Citations

9
Last Week
0
Last month
Citations as of Jan 14, 2017

Page view(s)

17
Last Week
0
Last month
Checked on Jan 15, 2017

Google ScholarTM

Check

Altmetric



Items in DSpace are protected by copyright, with all rights reserved, unless otherwise indicated.