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Non-Committed Procurement under Intricate Uncertainty

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  • Seungjin Han

Abstract

This paper studies asymmetric first-price menu auctions in the procurement environment where the buyer does not commit to a decision rule and asymmetric sellers have interdependent costs and statistically affiliated signals. Sellers compete in bidding a menu of contracts, where a contract specifies a vector of characteristics and a payment required from the buyer for delivering these characteristics. The buyer does not commit ex-ante to a decision rule but rather upon observing all the menus offered by sellers chooses the best contract. This paper establishes the existence of a continuum of separating monotone equilibria in this game bounded above by the jointly ex-post efficient outcome and below by the jointly interim efficient outcome. It shows that the jointly ex-post efficient equilibrium outcome is the only ex-post renegotiation proof outcome and it is also ex-ante robust to all continuation equilibria.

Suggested Citation

  • Seungjin Han, 2010. "Non-Committed Procurement under Intricate Uncertainty," Department of Economics Working Papers 2010-03, McMaster University, revised Mar 2013.
  • Handle: RePEc:mcm:deptwp:2010-03
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    File URL: http://socserv.mcmaster.ca/econ/rsrch/papers/archive/2010-03.pdf
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    Keywords

    first-price menu auctions; procurement; interdependent values; monotone equilibria; joint ex-post efficiency; ex-post renegotiation-proofness; ex-ante robustness;

    JEL classification:

    • D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design
    • C72 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Noncooperative Games

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