All Pay Quality-Bids in Score Procurement Auctions

Dan Kovenock and Jingfeng Lu

Working Papers from Chapman University, Economic Science Institute

Abstract: In this paper, we study score procurement auctions with all-pay quality bids. A supplierís score is the di§erence between his quality and price bids. The supplier with the highest score wins and gets paid his own price bid. The procurerís payo§ is the di§erence between the winnerís quality and the procurerís payments to the suppliers. Equilibrium quality and price bids are solved without Örst obtaining the corresponding equilibrium scores. We Önd that quality bids, the suppliersípayo§s and the procurerís payo§ do not depend on whether price bids are made contingent on quality bids. Compared to a benchmark of winner-pay quality bids, in which the losing suppliersí quality bidding costs are reimbursed by the procurer, all-pay quality bids tend to reduce quality provision and suppliersípayo§s, but they tend to increase the total surplus and the procurerís payo§.

Keywords: All-pay quality bids; Equilibrium analysis; Score auctions; Score procurements; Winner-pay quality bid (search for similar items in EconPapers)
JEL-codes: C70 D44 D89 L12 O32 (search for similar items in EconPapers)
Date: 2020
New Economics Papers: this item is included in nep-des, nep-gth, nep-mic and nep-sea
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Persistent link: https://EconPapers.repec.org/RePEc:chu:wpaper:20-01

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