A Study of Participation in Dynamic Auctions

We study participation and bidding decisions in repeated Michigan Department of Transportation procurement auctions. The key finding is that dynamic linkages in auctions exist in the participation stage of the game. As a result, with forward looking bidders we find that the sequencing of contracts by size can be used to influence competition within an auction. To fully understand the extent of these effects on auction outcomes, we construct and estimate a dynamic asymmetric auction model with endogenous participation and forward-looking bidders. We then quantify the level of inefficiency under the current auction rules and consider how the sequencing of heterogeneous contracts affects participation.