Market Provision of Custom Software: Learning Effects and Low Balling
研究定制软件开发中，由于代码复用和学习效应带来的先发优势如何影响开发商的竞标策略，发现开发商为抢占市场可能牺牲首期利润，导致报价下降慢于成本下降，且高波动项目更易出现低于成本的“低价竞标”。
Due to reusability of program code and learning effects in software development, development cost of custom software typically decreases in time and experience. This creates a first-mover advantage to software developers. The paper studies whether the benefits of declining development costs are passed on to buyers in the form of lower prices when developers bid strategically. By using a model of bidding auctions we characterize equilibrium bidding strategies of two software developers. In order to become the first mover and attain future market dominance, developers find it optimal to forgo profits from the first projects. As a result, bid prices (= development cost plus a profit margin to the developer) to the buyers may not necessarily decrease over time, and even if so, not as fast as development cost drops. We also show that bidders expect a higher profit margin from a high-variance project. Thus, if there exist high-variance projects in the future, developers are more likely to submit below-cost bid prices or “low ball.”