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The Design of Multidimensional Auctions

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  • Fernando Branco
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    Abstract

    Procurement auctions usually require the bid to specify several characteristics of the contract to be fulfilled. In this article I study the design of such mechanisms, allowing for a special case of correlation of the firm's costs. I describe the properties of optimal mechanisms and study the design of multidimensional auctions. Contrary to the independent-costs model, to implement the optimal outcome the procurer will need to use a two-stage auction: in the first stage the procurer selects one firm; in the second stage he bargains to readjust the level of quality to be provided.

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    Bibliographic Info

    Article provided by The RAND Corporation in its journal RAND Journal of Economics.

    Volume (Year): 28 (1997)
    Issue (Month): 1 (Spring)
    Pages: 63-81

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    Handle: RePEc:rje:randje:v:28:y:1997:i:spring:p:63-81

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    Cited by:
    1. Asker, John & Cantillon, Estelle, 2005. "Optimal Procurement When Both Price and Quality Matter," CEPR Discussion Papers 5276, C.E.P.R. Discussion Papers.
    2. Han, Seungjin, 2013. "Asymmetric first-price menu auctions under intricate uncertainty," Journal of Economic Theory, Elsevier, vol. 148(5), pages 2068-2095.
    3. John Asker & Estelle Cantillon, 2010. "Procurement when price and quality matter," RAND Journal of Economics, RAND Corporation, vol. 41(1), pages 1-34.
    4. Müller, Rudolf & Perea, Andrés & Wolf, Sascha, 2007. "Combinatorial Scoring Auctions," Research Memorandum 020, Maastricht University, Maastricht Research School of Economics of Technology and Organization (METEOR).
    5. Benjamin Blau & Clemens Dinther & Tobias Conte & Yongchun Xu & Christof Weinhardt, 2009. "How to Coordinate Value Generation in Service Networks," Business & Information Systems Engineering, Springer, vol. 1(5), pages 343-356, October.
    6. Teich, J.E. & Wallenius, H. & Wallenius, J. & Koppius, O.R., 2003. "Emerging Multiple e-Auctions," ERIM Report Series Research in Management ERS-2003-058-LIS, Erasmus Research Institute of Management (ERIM), ERIM is the joint research institute of the Rotterdam School of Management, Erasmus University and the Erasmus School of Economics (ESE) at Erasmus Uni.
    7. Peter Postl, 2011. "Efficiency versus Optimality in Procurement," Discussion Papers 11-03rr, Department of Economics, University of Birmingham.
    8. Kevin Yili Hong & Alex Chong Wang & Paul A. Pavlou, 2013. "How does Bid Visibility Matter in Buyer-Determined Auctions? Comparing Open and Sealed Bid Auctions in Online Labor Markets," Working Papers 13-05, NET Institute.
    9. Makoto HANAZONO & Jun NAKABAYASHI & Masanori TSURUOKA, 2013. "Procurement Auctions with General Price-Quality Evaluation," KIER Working Papers 845, Kyoto University, Institute of Economic Research.
    10. Krishnendu Ghosh Dastidar, 2014. "Nature of competition and new technology adoption," ISER Discussion Paper 0895, Institute of Social and Economic Research, Osaka University, revised Mar 2014.
    11. Thomas Rieck, 2009. "Risk and Expected Utility Theory," Bonn Econ Discussion Papers bgse7_2009, University of Bonn, Germany.
    12. Martin Bichler & Alexander Pikovsky & Thomas Setzer, 2009. "An Analysis of Design Problems in Combinatorial Procurement Auctions," Business & Information Systems Engineering, Springer, vol. 1(1), pages 111-117, February.

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