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Scoring Auction by an Informed Principal

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  • Takeshi Nishimura
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    Abstract

    This paper considers a scoring auction used in procurement. In this auction, each supplier offers both price and quality, and a supplier whose offer achieves the highest score wins. The environment we consider has two features: the buyer has private information and quality is multi-dimensional. We show that a scoring auction implements the ex ante optimal mechanism for the buyer when the value complementarity between quality attributes is sufficiently greater than the cost substitutability. We further show how the buyer should design scoring rules.

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    File URL: http://gcoe.ier.hit-u.ac.jp/research/discussion/2008/pdf/gd11-224.pdf
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    Bibliographic Info

    Paper provided by Institute of Economic Research, Hitotsubashi University in its series Global COE Hi-Stat Discussion Paper Series with number gd11-224.

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    Date of creation: Feb 2012
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    Handle: RePEc:hst:ghsdps:gd11-224

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    1. Guofu Tan, 1996. "Optimal Procurement Mechanisms for an Informed Buyer," Canadian Journal of Economics, Canadian Economics Association, vol. 29(3), pages 699-716, August.
    2. John Asker & Estelle Cantillon, 2008. "Properties of scoring auctions," ULB Institutional Repository 2013/8999, ULB -- Universite Libre de Bruxelles.
    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. Maskin, Eric & Tirole, Jean, 1990. "The Principal-Agent Relationship with an Informed Principal: The Case of Private Values," Econometrica, Econometric Society, vol. 58(2), pages 379-409, March.
    5. Laffont, Jean-Jacques & Tirole, Jean, 1987. "Auctioning Incentive Contracts," Journal of Political Economy, University of Chicago Press, vol. 95(5), pages 921-37, October.
    6. Roger B. Myerson, 1981. "Mechanism Design by an Informed Principal," Discussion Papers 481, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
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