Procurement Bidding in First-Price and Second-Price,Sealed-Bid Auctions within the Common-Value Paradigm

Within the common-value paradigm, I examine the magnitude of the differencein expected outcome between first-price and second-price, sealed-bid auctions.I limit myself to two empirical specifications of bidders' signals: Weibulland normal distribution. The optimal bid functions and the expected procurer'scost under both auction formats are derived. Simultions are undertaken toanalyze the impact that random draws of signals have on the differences inoutcome from the two auction formats. Using estimates from structuralestimation in previous empirical work on first-price auction data, whereWeibull and normal distributions of signals have been applied, thehypothetical expected gain from switching from a first-price, sealed-bidauction to a second-price, sealed-bid auction mechanism is computed.