Procurement when Price and Quality Matter
AbstractA buyer seeks to procure a good characterized by its price and its quality from suppliers who have private information about their cost structure ( xed cost and marginal cost of providing quality). We characterize the buyers optimal buying mechanism. We then use the optimal mechanism as a theoretical and numerical benchmark to study simpler buying procedures such as scoring auctions and bargaining. Scoring auctions can extract a signifi cant proportion of the buyers strategic surplus (the difference between the expected utility from the optimal mechanism and the e¢ cient auction). Bargaining does less well and often does worse than the e¢ cient auction.
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Bibliographic InfoPaper provided by ULB -- Universite Libre de Bruxelles in its series ULB Institutional Repository with number 2013/99378.
Date of creation: 2010
Date of revision:
Publication status: Published in: The Rand journal of economics (2010) v.41 n° 1,p.1-34
Other versions of this item:
- Asker, John & Cantillon, Estelle, 2007. "Procurement when Price and Quality Matter," CEPR Discussion Papers 6082, C.E.P.R. Discussion Papers.
- John Asker & Estelle Cantillon, 2006. "Procurement When Price and Quality Matter," Working Papers 06-24, New York University, Leonard N. Stern School of Business, Department of Economics.
- C78 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Bargaining Theory; Matching Theory
- D44 - Microeconomics - - Market Structure and Pricing - - - Auctions
- D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design
- L22 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Firm Organization and Market Structure
- L24 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Contracting Out; Joint Ventures
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.:
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