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Econometric Society, Econometrica, 1(70), p. 343-355

DOI: 10.1111/1468-0262.00278

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On the Value of Competition in Procurement Auctions

Journal article published in 2002 by Olivier Compte, Philippe Jehiel
This paper is available in a repository.
This paper is available in a repository.

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Preprint: archiving forbidden
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Postprint: archiving forbidden
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Abstract

We develop and implement a collocation method to solve for an equilibrium in the dynamic legislative bargaining game of Duggan and Kalandrakis (2008). We formulate the collocation equations in a quasi-discrete version of the model, and we show that the collocation equations are locally Lipchitz continuous and directionally differentiable. In numerical experiments, we successfully implement a globally convergent variant of Broyden's method on a preconditioned version of the collocation equations, and the method economizes on computation cost by more than 50% compared to the value iteration method. We rely on a continuity property of the equilibrium set to obtain increasingly precise approximations of solutions to the continuum model. We showcase these techniques with an illustration of the dynamic core convergence theorem of Duggan and Kalandrakis (2008) in a nine-player, two-dimensional model with negative quadratic preferences.