Optimal Procurement Mechanisms

Alejandro Manelli and Daniel Vincent

Econometrica, 1995, vol. 63, issue 3, 591-620

Abstract: The properties of optimal mechanisms in environments where sellers are privately informed about quality are analyzed. A methodology is provided for deriving conditions that are necessary and sufficient to determine when two simple trading environments maximize either social or private surplus. The commonly used auction mechanism is frequently inefficient in procurement environments. Often, the optimal mechanism is simply to order potential suppliers and to tender take-it-or-leave-it offers to each sequentially. The environments in which either mechanism is optimal are completely characterized. Copyright 1995 by The Econometric Society.

Date: 1995
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Working Paper: Optimal Procurement Mechanisms (1992)
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