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Information Provision in Procurement Auctions

We analyze the optimal provision of information in a procurement auction with horizontally di 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 inecient 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 t 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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File URL: http://homepage.univie.ac.at/Papers.Econ/RePEc/vie/viennp/vie1306.pdf
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Paper provided by University of Vienna, Department of Economics in its series Vienna Economics Papers with number 1306.

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Date of creation: Sep 2013
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Handle: RePEc:vie:viennp:1306
Contact details of provider: Web page: http://www.univie.ac.at/vwl

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  1. Steven C. Salop, 1979. "Monopolistic Competition with Outside Goods," Bell Journal of Economics, The RAND Corporation, vol. 10(1), pages 141-156, Spring.
  2. 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.
  3. Taylor, Curtis R, 1995. "Digging for Golden Carrots: An Analysis of Research Tournaments," American Economic Review, American Economic Association, vol. 85(4), pages 872-90, September.
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