Highway construction auctions in California may be causing inefficiencies and losses.
The article presents a method to estimate costs and inefficiencies in repeated auctions with capacity constraints. The researchers analyzed highway construction auctions in California from 1996 to 1999. They found that winning previous contracts affected bidders' costs and bids, leading to inefficiencies in the auction process. The estimation method used data on bids, bidder characteristics, and contract details to quantify the impact of intertemporal constraints on efficiency losses.