Probabilistic Procurement Auctions
AbstractWe analyse procurement auctions in which sellers are distinguished on the basis of the ratios of quality per unit of money that they offer. Sellers are privately informed on the offered quality of the technology or good. We assume that the procurer cannot perfectly identify the best offer. Thus, with positive and decreasing probability, the second, third, etc. best ratio offered is selected as the winner of the auction. We model the decision process as based on a general noisy ranking of offers. We show that, although the problem seems to be analytically intractable in general, there exists a simple symmetric, pure-strategy equilibrium in which everyone follows the simple heuristic to match the same ‘focal’ price-quality ratio.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
Bibliographic InfoPaper provided by CESifo Group Munich in its series CESifo Working Paper Series with number 4320.
Date of creation: 2013
Date of revision:
auctions; contests; price-quality ratio; procurement; scoring;
Find related papers by JEL classification:
- C70 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - General
- D70 - Microeconomics - - Analysis of Collective Decision-Making - - - General
- H57 - Public Economics - - National Government Expenditures and Related Policies - - - Procurement
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Leonid Polishchuk & Alexander Tonis, 2013. "Endogenous contest success functions: a mechanism design approach," Economic Theory, Springer, vol. 52(1), pages 271-297, January.
- Wasser, Cédric, 2010.
"Rent-seeking Contests under Symmetric and Asymmetric Information,"
Discussion Paper Series of SFB/TR 15 Governance and the Efficiency of Economic Systems
311, Free University of Berlin, Humboldt University of Berlin, University of Bonn, University of Mannheim, University of Munich.
- Hao Jia, 2008. "A stochastic derivation of the ratio form of contest success functions," Public Choice, Springer, vol. 135(3), pages 125-130, June.
- Juan David Prada-Sarmiento, 2010. "Uncertainty in conflicts," DOCUMENTOS CEDE 007713, UNIVERSIDAD DE LOS ANDES-CEDE.
- Kaplan, Todd, et al, 2002.
"All-Pay Auctions with Variable Rewards,"
Journal of Industrial Economics,
Wiley Blackwell, vol. 50(4), pages 417-30, December.
- Alex Gershkov & Jianpei Li & Paul Schweinzer, 2009. "Efficient tournaments within teams," RAND Journal of Economics, RAND Corporation, vol. 40(1), pages 103-119.
- Mark Fey, 2008. "Rent-seeking contests with incomplete information," Public Choice, Springer, vol. 135(3), pages 225-236, June.
- Christian Ewerhart, 2010. "Rent-seeking contests with independent private values," IEW - Working Papers 490, Institute for Empirical Research in Economics - University of Zurich.
- Maria Arbatskaya & Hugo Mialon, 2010. "Multi-activity contests," Economic Theory, Springer, vol. 43(1), pages 23-43, April.
- Luis C. Corchon, 2007.
"The theory of contests : a survey,"
Economics Working Papers
we075126, Universidad Carlos III, Departamento de Economía.
- Luis Corchon & Matthias Dahm, 2007.
"Foundations For Contest Success Functions,"
Economics Working Papers
we070401, Universidad Carlos III, Departamento de Economía.
- Lambert Schoonbeek & Barbara Winkel, 2006. "Activity and inactivity in a rent-seeking contest with private information," Public Choice, Springer, vol. 127(1), pages 123-132, April.
- Hurley, Terrance M. & Shogren, Jason F., 1998. "Asymmetric information contests," European Journal of Political Economy, Elsevier, vol. 14(4), pages 645-665, November.
- Makoto HANAZONO & Jun NAKABAYASHI & Masanori TSURUOKA, 2013. "Procurement Auctions with General Price-Quality Evaluation," KIER Working Papers 845, Kyoto University, Institute of Economic Research.
- Wärneryd, Karl, 2000.
"Information in Conflicts,"
Working Paper Series in Economics and Finance
388, Stockholm School of Economics.
- Wärneryd, Karl, 2001. "Information in conflicts," Discussion Papers, Research Unit: Market Processes and Governance FS IV 01-11, Social Science Research Center Berlin (WZB).
- Garfinkel, Michelle R. & Skaperdas, Stergios, 2007.
"Economics of Conflict: An Overview,"
Handbook of Defense Economics,
- Ryvkin, Dmitry, 2010. "Contests with private costs: Beyond two players," European Journal of Political Economy, Elsevier, vol. 26(4), pages 558-567, December.
- Francesco Decarolis, 2009. "When the highest bidder loses the auction: theory and evidence from public procurement," Temi di discussione (Economic working papers) 717, Bank of Italy, Economic Research and International Relations Area.
- Qiang Fu & Jingfeng Lu, 2012. "Micro foundations of multi-prize lottery contests: a perspective of noisy performance ranking," Social Choice and Welfare, Springer, vol. 38(3), pages 497-517, March.
- David A. Malueg & Andrew J. Yates, 2004. "Sent Seeking With Private Values," Public Choice, Springer, vol. 119(1_2), pages 161-178, 04.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Julio Saavedra).
If references are entirely missing, you can add them using this form.