Federal Agencies Auction off PPE in the beginning of COVID
This article discusses how federal agencies auctioned off PPE in the months leading up to the COVID-19 pandemic. The General Services Administration, or GSA, is an agency that helps get rid of surplus, unwanted goods of the government. If federal agencies or state governments are not interested in such assets, the GSA auctions them off to the highest bidder in public online auctions, such as the one shown below.
The article also detailed how over 100 PPE kits, which included “N95 masks, gloves, gowns, hoods, face shields, and PAPRs)”, were sold in January to bidders for $2,010. Despite expiring in June 2020 and being in high demand from healthcare workers, hospitals continued to auction these kits. The image above depicts the sale of such kits and includes information such as number of bidders, current bid, and the closing time for the bid. One of the concerns regarding these sales was the timing of such sales; even after the CDC confirmed its first case in January, the GSA continued to auction off these kits. From sources within the agency, it is alleged that the agency was not aware of the scale of the national health crisis.
This auctioning of PPEs prior to and during the early months of the pandemic is relevant to our course, as it discusses first-price auctions. First-price auctions are when bidders pay exactly the price that they pay. Traditionally, it is a dominant strategy to stay in until bidders reach their value. Originally, buyers were bidding around $1-2 per mask. This means that they valued the masks at around that price, and they were bidding until their true value was reached. However, in the case of PPE auctions, by the last few sales made in February, buyers were bidding $7.82 per mask, which was a 2500% increase from months earlier. In typical first-price auctions, buyers do not want to risk overspending and thus would bid less. The fact that buyers are willing so much more signals higher demand and higher valuation of these goods. This may reflect a potential shortage, as buyers forgo the risk of overspending and instead focus on getting the resources they need at new (and significantly higher) price points. Thus, higher valuation for these goods causes the price of the masks to increase, and sellers make more in these auctions because buyers are willing to pay more.
https://www.wthr.com/article/news/investigations/13-investigates/13-investigates-federal-agencies-auctioned-ppe-covid-19-pandemic-approached/531-96bcd9ea-7377-431e-b808-6d1869a0d661