IDEAS home Printed from
   My bibliography  Save this paper

Optimal Procurement Mechanisms


  • Alejandro M. Manelli
  • Daniel R. Vincent


The procurement of supplies is often conducted through the buyer analogue of an auction. Sealed bids are submitted and the contract is awarded to the lowest bidder. Although this method may be an optimal way of selling an object, an additional complication arises in the case of purchasing a good. When sellers are privately informed about the quality of the good to be sold, these mechanisms typically result in the provision of the lowest quality object. This paper characterizes optimal mechanisms in environments where sellers are privately informed about quality. It shows that the commonly used auction mechanism is privately or socially optimal in only a small class of environments. In another plausible set of environments the optimal mechanism is simply to order potential supplies and to tender take-it-or-leave-it offers to each sequentially. We use the duality theorem of linear programming to provide a methodology by which necessary and sufficient conditions can be derived to determine when any incentive compatible trading environment maximizes social or private surplus.

Suggested Citation

  • Alejandro M. Manelli & Daniel R. Vincent, 1992. "Optimal Procurement Mechanisms," Discussion Papers 999, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
  • Handle: RePEc:nwu:cmsems:999

    Download full text from publisher

    File URL:
    File Function: main text
    Download Restriction: no

    Other versions of this item:

    References listed on IDEAS

    1. Myerson, Roger B. & Satterthwaite, Mark A., 1983. "Efficient mechanisms for bilateral trading," Journal of Economic Theory, Elsevier, vol. 29(2), pages 265-281, April.
    2. Cremer, Jacques & McLean, Richard P, 1988. "Full Extraction of the Surplus in Bayesian and Dominant Strategy Auctions," Econometrica, Econometric Society, vol. 56(6), pages 1247-1257, November.
    Full references (including those not matched with items on IDEAS)

    More about this item


    Access and download statistics


    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:nwu:cmsems:999. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Fran Walker). General contact details of provider: .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.