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Optimal Procurement Mechanisms for an Informed Buyer

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  • Guofu Tan
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    Abstract

    This paper studies a buyer (e.g., a government agency) offering a procurement contract to a number of privately informed suppliers. The buyer has private information about her demand for the product to be procured. The optimal mechanisms for all types of the buyer are examined. It is optimal for the buyer to reveal her demand information through the contract offer and use a first-price sealed-bid auction procedure to award the contract, announcing her reserve price in advance. Any second-price auction is shown to yield less expected surplus for the buyer than the optimal first-price auction does when the buyer's marginal willingness to pay decreases with quantity.

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    File URL: http://links.jstor.org/sici?sici=0008-4085%28199608%2929%3A3%3C699%3AOPMFAI%3E2.0.CO%3B2-2
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    Bibliographic Info

    Article provided by Canadian Economics Association in its journal Canadian Journal of Economics.

    Volume (Year): 29 (1996)
    Issue (Month): 3 (August)
    Pages: 699-716

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    Handle: RePEc:cje:issued:v:29:y:1996:i:3:p:699-716

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    Cited by:
    1. Rolf Tisljar, 2002. "Mechanism Design by an Informed Principal - Pure-Strategy Equilibria for a Common Value Model," Bonn Econ Discussion Papers bgse21_2002, University of Bonn, Germany.
    2. Takeshi Nishimura, 2012. "Scoring Auction by an Informed Principal," Global COE Hi-Stat Discussion Paper Series gd11-224, Institute of Economic Research, Hitotsubashi University.
    3. Zhang, Heng & Yang, Ming & Bao, Jiye & Gong, Pu, 2013. "Competitive investing equilibrium under a procurement mechanism," Economic Modelling, Elsevier, vol. 31(C), pages 734-738.
    4. Sofia Lundberg, 2005. "Restrictions on Competition in Municipal Competitive Procurement in Sweden," International Advances in Economic Research, Springer, vol. 11(3), pages 329-342, August.
    5. Thomas Tröger & Tymofiy Mylovanov, 2008. "Optimal Auction Design and Irrelevance of Private Information," Bonn Econ Discussion Papers bgse21_2008, University of Bonn, Germany.

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