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Communication of preferences in contests for contracts

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  • Todd Kaplan

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Abstract

This paper models a contest where several sellers compete for a contract with a single buyer. There are several styles of possible designs with a subset of them preferred by the buyer. We examine what happens when the buyer communicates information about his preferences. If the sellers are unable to change their style, then there is no effect on the welfare of the sellers. If the sellers are able to make adjustments, extra information may either boost or damage the sellers’ profits. While the chance that there will be a proposal of a style preferred by the buyer cannot decrease, the buyer’s surplus may increase or decrease. Copyright Springer-Verlag 2012

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File URL: http://hdl.handle.net/10.1007/s00199-010-0525-2
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Bibliographic Info

Article provided by Springer in its journal Economic Theory.

Volume (Year): 51 (2012)
Issue (Month): 2 (October)
Pages: 487-503

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Handle: RePEc:spr:joecth:v:51:y:2012:i:2:p:487-503

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Related research

Keywords: Contests; Procurement; Communication; D44; H57;

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References

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  1. Che, Yeon-Koo & Gale, Ian L, 1998. "Caps on Political Lobbying," American Economic Review, American Economic Association, vol. 88(3), pages 643-51, June.
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  7. Todd R. Kaplan, . "Why Banks Should Keep Secrets," Working papers _005, University of Minnesota, Department of Economics.
  8. Juan José Ganuza, 2003. "Competition and cost overruns in procurement," Economics Working Papers 772, Department of Economics and Business, Universitat Pompeu Fabra.
  9. Péter Eső & Bal�zs Szentes, 2007. "Optimal Information Disclosure in Auctions and the Handicap Auction," Review of Economic Studies, Oxford University Press, vol. 74(3), pages 705-731.
  10. Nicola Persico, 2000. "Information Acquisition in Auctions," Econometrica, Econometric Society, vol. 68(1), pages 135-148, January.
  11. Patrick Bajari & Steven Tadelis, 1999. "Incentives versus Transaction Costs: A Theory of Procurement Contracts," Working Papers 99029, Stanford University, Department of Economics.
  12. Todd R. Kaplan & David Wettstein, 2006. "Caps on Political Lobbying: Comment," American Economic Review, American Economic Association, vol. 96(4), pages 1351-1354, September.
  13. Alex Gershkov, 2009. "Optimal auctions and information disclosure," Review of Economic Design, Springer, vol. 13(4), pages 335-344, December.
  14. Paul Milgrom & Robert J. Weber, 1981. "A Theory of Auctions and Competitive Bidding," Discussion Papers 447R, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
  15. Jean-Jacques Laffont & Jean Tirole, 1993. "A Theory of Incentives in Procurement and Regulation," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262121743, December.
  16. Amann, Erwin & Leininger, Wolfgang, 1996. "Asymmetric All-Pay Auctions with Incomplete Information: The Two-Player Case," Games and Economic Behavior, Elsevier, vol. 14(1), pages 1-18, May.
  17. Steven C. Salop, 1979. "Monopolistic Competition with Outside Goods," Bell Journal of Economics, The RAND Corporation, vol. 10(1), pages 141-156, Spring.
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Cited by:
  1. Nicola Doni & Domenico Menicucci, 2011. "Information revelation in procurement auctions with two-sided asymmetric information," Working Papers - Economics wp2011_14.rdf, Universita' degli Studi di Firenze, Dipartimento di Scienze per l'Economia e l'Impresa.
  2. Kai Konrad & Dan Kovenock, 2012. "Introduction," Economic Theory, Springer, vol. 51(2), pages 241-245, October.

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