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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. Luis C. Corchon, 2007. "The theory of contests : a survey," Economics Working Papers we075126, Universidad Carlos III, Departamento de Economía.
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  13. Alex Gershkov & Jianpei Li & Paul Schweinzer, 2009. "Efficient tournaments within teams," RAND Journal of Economics, RAND Corporation, vol. 40(1), pages 103-119.
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  16. Christian Ewerhart, 2010. "Rent-seeking contests with independent private values," IEW - Working Papers 490, Institute for Empirical Research in Economics - University of Zurich.
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