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Information Disclosure in Procurement Auctions with Horizontally Differentiated Suppliers

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Author Info

  • Domenico Colucci

    ()
    (Dipartimento di Matematica per le Decisioni - Università degli Studi di Firenze)

  • Nicola Doni

    ()
    (Dipartimento di Sciense Economiche - Università degli Studi di Firenze)

  • Vincenzo Valori

    ()
    (Dipartimento di Matematica per le Decisioni - Università degli Studi di Firenze)

Abstract

This work studies a model of multidimensional auction in which a buyer needs to procure a given good from either of two potential suppliers whose quality is the buyer's private information and whose production costs are heterogeneous. Costs asymmetries constitute a novelty in this framework and extend e.g. the model of Gal-Or et al. (2007). We compare the outcomes of different procurement policies from the viewpoint of both efficiency and the buyer's payoff. A trade-off between efficiency and rent-extraction emerges. The buyer will maximize her expected utility by selecting a first score auction and either concealing or privately revealing suppliers' quality - the optimal choice depending on the degree of heterogeneity in suppliers' costs and qualities. However, neither of these auction mechanisms will be efficient: efficiency calls for a second score auction or a first score auction with public disclosure of suppliers' quality. The findings hinge on the equivalence between auction models and models of horizontal differentiation and take advantage of results for asymmetric auctions developed by Maskin & Riley (2000).

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Bibliographic Info

Paper provided by Universita' degli Studi di Firenze, Dipartimento di Scienze per l'Economia e l'Impresa in its series Working Papers - Mathematical Economics with number 2011-02.

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Length: 33 pages
Date of creation: Jan 2011
Date of revision:
Handle: RePEc:flo:wpaper:2011-02

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Related research

Keywords: multidimensional auctions; procurement policies; endogenous information; horizontal differentiation; asymmetric auctions.;

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References

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  1. Esther Gal-Or & Mordechai Gal-Or & Anthony Dukes, 2007. "Optimal information revelation in procurement schemes," RAND Journal of Economics, RAND Corporation, vol. 38(2), pages 400-418, 06.
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Cited by:
  1. Stoll, Sebastian & Zöttl, Gregor, 2012. "Information Disclosure in Open Non-Binding Procurement Auctions: an Empirical Study," Discussion Papers in Economics 13112, University of Munich, Department of Economics.
  2. Domenico Colucci & Nicola Doni & Vincenzo Valori, 2012. "Preferential treatment in procurement auctions through information revelation," Working Papers - Mathematical Economics, Universita' degli Studi di Firenze, Dipartimento di Scienze per l'Economia e l'Impresa 2012-06, Universita' degli Studi di Firenze, Dipartimento di Scienze per l'Economia e l'Impresa.
  3. Stoll, Sebastian & Zöttl, Gregor, 2012. "Information Disclosure in Dynamic Buyer-Determined Procurement Auctions: An Empirical Study," Annual Conference 2012 (Goettingen): New Approaches and Challenges for the Labor Market of the 21st Century 62044, Verein für Socialpolitik / German Economic Association.
  4. Stoll, Sebastian & Zöttl, Gregor, 2014. "Transparency in Buyer-Determined Auctions: Should Quality be Private or Public?," Discussion Paper Series of SFB/TR 15 Governance and the Efficiency of Economic Systems 459, Free University of Berlin, Humboldt University of Berlin, University of Bonn, University of Mannheim, University of Munich.
  5. 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.

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