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Fuzzy Price-Quality Ratio Procurement under Incomplete Information

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  • Thomas Giebe
  • Paul Schweinzer

Abstract

We analyse a procurement auction in which sellers are distinguished on the basis of the ratios of quality per unit of money they offer. Sellers are privately informed on the quality of the technology or good they offer. 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, provided that the procurer’s ranking technology employs the right degree of noisiness.

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Bibliographic Info

Paper provided by Department of Economics, University of York in its series Discussion Papers with number 12/26.

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Date of creation: Oct 2012
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Handle: RePEc:yor:yorken:12/26

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Keywords: Auctions; Contests; Procurement;

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  1. Cédric Wasser, 2013. "Incomplete information in rent-seeking contests," Economic Theory, Springer, vol. 53(1), pages 239-268, May.
  2. Luis Corchon & Matthias Dahm, 2007. "Foundations For Contest Success Functions," Economics Working Papers we070401, Universidad Carlos III, Departamento de Economía.
  3. Luis Corchón, 2007. "The theory of contests: a survey," Review of Economic Design, Springer, vol. 11(2), pages 69-100, September.
  4. Wärneryd, Karl, 2001. "Information in conflicts," Discussion Papers, Research Unit: Market Processes and Governance FS IV 01-11, Social Science Research Center Berlin (WZB).
  5. John Asker & Estelle Cantillon, 2008. "Properties of scoring auctions," RAND Journal of Economics, RAND Corporation, vol. 39(1), pages 69-85.
  6. Juan David Prada-Sarmiento, 2010. "Uncertainty in conflicts," DOCUMENTOS CEDE 007713, UNIVERSIDAD DE LOS ANDES-CEDE.
  7. Michelle R. Garfinkel & Stergios Skaperdas, 2006. "Economics of Conflict: An Overview," Working Papers 050623, University of California-Irvine, Department of Economics, revised Sep 2006.
  8. Maria Arbatskaya & Hugo Mialon, 2005. "Two-activity Contests," Emory Economics 0527, Department of Economics, Emory University (Atlanta).
  9. Leonid Polishchuk & Alexander Tonis, 2013. "Endogenous contest success functions: a mechanism design approach," Economic Theory, Springer, vol. 52(1), pages 271-297, January.
  10. 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.
  11. Alex Gershkov & Jianpei Li & Paul Schweinzer, 2009. "Efficient tournaments within teams," RAND Journal of Economics, RAND Corporation, vol. 40(1), pages 103-119.
  12. Christian Ewerhart, 2010. "Rent-seeking contests with independent private values," IEW - Working Papers 490, Institute for Empirical Research in Economics - University of Zurich.
  13. Hurley, Terrance M. & Shogren, Jason F., 1998. "Asymmetric information contests," European Journal of Political Economy, Elsevier, vol. 14(4), pages 645-665, November.
  14. Ryvkin, Dmitry, 2010. "Contests with private costs: Beyond two players," European Journal of Political Economy, Elsevier, vol. 26(4), pages 558-567, December.
  15. David A. Malueg & Andrew J. Yates, 2004. "Sent Seeking With Private Values," Public Choice, Springer, vol. 119(1_2), pages 161-178, 04.
  16. 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.
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