This paper analyzes an auction mechanism that excludes overoptimistic bidders inspired by the rules of the procurement auctions adopted by several Japanese local governments. Our theoretical and experimental results suggest that the endogenous exclusion rule reduces the probability of suffering...

Several European countries and many Japanese local governments began including endogenous minimum prices (EMPs) in first-price auctions (FPAs) in their public procurements. The EMP is calculated based on its relation to the average of all bids or to some lowest bids. Any bid lower than the EMP...