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Information Provision in Procurement Auctions

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  • JOAQUÍN COLEFF
  • DANIEL GARCIA

Abstract

We analyze the optimal provision of information in a procurement auction with horizontally diff erentiated goods. The buyer has private information about her preferred location on the product space and has access to a costless communication device. A seller who pays the entry cost may submit a bid comprising a location and a minimum price. We characterize the optimal information structure and show that the buyer prefers to attract only two bids. Further, additional sellers are inefficient since they reduce total and consumer surplus, gross of entry costs. We show that the buyer will not nd it optimal to send public information to all sellers. On the other hand, she may pro fit from setting a minimum price and that a severe hold-up problem arises if she lacks commitment to set up the rules of the auction ex-ante.
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  • Joaquín Coleff & Daniel Garcia, 2017. "Information Provision in Procurement Auctions," Journal of Public Economic Theory, Association for Public Economic Theory, vol. 19(2), pages 426-444, April.
    • Handle: RePEc:bla:jpbect:v:19:y:2017:i:2:p:426-444
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    File URL: http://hdl.handle.net/10.1111/jpet.2017.19.issue-2
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    References listed on IDEAS

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    Cited by:

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    2. Marian W. Moszoro & Pablo T. Spiller, 2019. "Political contestability and public contracting," Journal of Public Economic Theory, Association for Public Economic Theory, vol. 21(5), pages 945-966, October.

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    More about this item

    JEL classification:

    • D44 - Microeconomics - - Market Structure, Pricing, and Design - - - Auctions
    • D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design
    • H57 - Public Economics - - National Government Expenditures and Related Policies - - - Procurement

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