Strategic Ignorance in Sequential Procurement

Silvana Krasteva and Huseyin Yildirim

American Economic Journal: Microeconomics, 2019, vol. 11, issue 2, 131-72

Abstract: Should a buyer approach sellers of complementary goods informed or uninformed of her private valuations, and if informed, in which sequence? In this paper, we show that an informed buyer would start with the high-value seller to minimize future holdup. Informed (or careful) sequencing may, however, hurt the buyer as sellers "read" into it. The buyer may, therefore, commit to ignorance, perhaps, by overloading herself with unrelated tasks, delegating the sequencing decision, or letting sellers self-schedule. Absent such commitment, we show that ignorance is not time-consistent for the buyer, but it increases trade. Evidence on land assembly supports our findings.

JEL-codes: D11 D81 D82 D83 (search for similar items in EconPapers)
Date: 2019
Note: DOI: 10.1257/mic.20170076
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Citations: View citations in EconPapers (5)

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