Multidimensional procurement auctions with unknown weights
This paper studies the consequences of holding a procurement auction when the principal chooses not to show its preferences. My paper extends the procurement auction model of Che (1993) to a situation where both the principal and the agents have private information. Thus, unknown parameters of both the principal and the agents leads to unclear reaction strategies. I show that an unknown weight on the principal’s valuation of quality leads to the production of to much quality and to high informational rent. A problem that can be reduced using a revelation mechanism. Having an unknown weight on quality gives rise to an analysis of a principal that can not fully commit to the outcome induced by the scoring rule. Therefore, my result apply to contract theory and it’s problems with imperfect commitment.
|Date of creation:||01 Aug 2011|
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- 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.
- John Asker & Estelle Cantillon, 2010. "Procurement when Price and Quality Matter," ULB Institutional Repository 2013/99378, ULB -- Universite Libre de Bruxelles.
- Bulow, Jeremy I. & Klemperer, Paul, 2009.
"Why Do Sellers (Usually) Prefer Auctions?,"
CEPR Discussion Papers
7411, C.E.P.R. Discussion Papers.
- Paul Milgrom & Ilya Segal, 2002. "Envelope Theorems for Arbitrary Choice Sets," Econometrica, Econometric Society, vol. 70(2), pages 583-601, March.
- Yeon-Koo Che, 1993.
"Design Competition through Multidimensional Auctions,"
RAND Journal of Economics,
The RAND Corporation, vol. 24(4), pages 668-680, Winter.
- Che, Y.K., 1991. "Design Competition through Multidimensional Auctions," Working papers 9123, Wisconsin Madison - Social Systems.
- Dasgupta, Sudipto & Spulber, Daniel F., 1989. "Managing procurement auctions," Information Economics and Policy, Elsevier, vol. 4(1), pages 5-29.
- Roger B. Myerson, 1977.
"Incentive Compatability and the Bargaining Problem,"
284, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
- Myerson, Roger B, 1979. "Incentive Compatibility and the Bargaining Problem," Econometrica, Econometric Society, vol. 47(1), pages 61-73, January.
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