Multidimensional procurement auctions with unknown weights
AbstractThis paper studies the consequences of holding a procurement auction when the principal chooses not to show its preferences. My paper extends the procurement auction model of Che (1993) to a situation where both the principal and the agents have private information. Thus, unknown parameters of both the principal and the agents leads to unclear reaction strategies. I show that an unknown weight on the principal’s valuation of quality leads to the production of to much quality and to high informational rent. A problem that can be reduced using a revelation mechanism. Having an unknown weight on quality gives rise to an analysis of a principal that can not fully commit to the outcome induced by the scoring rule. Therefore, my result apply to contract theory and it’s problems with imperfect commitment.
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Bibliographic InfoPaper provided by University of Copenhagen. Department of Economics in its series Discussion Papers with number 11-23.
Length: 16 pages
Date of creation: 01 Aug 2011
Date of revision:
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Mechanism design; contract theory; multidimensional auctions;
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