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Information Provision in Procurement Auctions

Author

Listed:
  • Joaquin 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.

Suggested Citation

  • Joaquin Coleff & Daniel Garcia, 2013. "Information Provision in Procurement Auctions," Borradores de Investigación 011006, Universidad del Rosario.
  • Handle: RePEc:col:000091:011006
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    References listed on IDEAS

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    1. Justin Jia & Ronald M. Harstad & Michael H. Rothkopf, 2010. "Information Variability Impacts in Auctions," Decision Analysis, INFORMS, vol. 7(1), pages 137-142, March.
    2. Steven C. Salop, 1979. "Monopolistic Competition with Outside Goods," Bell Journal of Economics, The RAND Corporation, vol. 10(1), pages 141-156, Spring.
    3. Juan José Ganuza, 2003. "Ignorance promotes competition: An auction model with endogenous private valuations," Economics Working Papers 671, Department of Economics and Business, Universitat Pompeu Fabra.
    4. Tong Li & Xiaoyong Zheng, 2009. "Entry and Competition Effects in First-Price Auctions: Theory and Evidence from Procurement Auctions," Review of Economic Studies, Oxford University Press, vol. 76(4), pages 1397-1429.
    5. Taylor, Curtis R, 1995. "Digging for Golden Carrots: An Analysis of Research Tournaments," American Economic Review, American Economic Association, vol. 85(4), pages 872-890, September.
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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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