Information Disclosure in Procurement Auctions with Horizontally Differentiated Suppliers

Domenico Colucci, Nicola Doni () and Vincenzo Valori

No 2011-02, Working Papers - Mathematical Economics from Universita' degli Studi di Firenze, Dipartimento di Scienze per l'Economia e l'Impresa

Abstract: This work studies a model of multidimensional auction in which a buyer needs to procure a given good from either of two potential suppliers whose quality is the buyer's private information and whose production costs are heterogeneous. Costs asymmetries constitute a novelty in this framework and extend e.g. the model of Gal-Or et al. (2007). We compare the outcomes of different procurement policies from the viewpoint of both efficiency and the buyer's payoff. A trade-off between efficiency and rent-extraction emerges. The buyer will maximize her expected utility by selecting a first score auction and either concealing or privately revealing suppliers' quality - the optimal choice depending on the degree of heterogeneity in suppliers' costs and qualities. However, neither of these auction mechanisms will be efficient: efficiency calls for a second score auction or a first score auction with public disclosure of suppliers' quality. The findings hinge on the equivalence between auction models and models of horizontal differentiation and take advantage of results for asymmetric auctions developed by Maskin & Riley (2000).

Keywords: multidimensional auctions; procurement policies; endogenous information; horizontal differentiation; asymmetric auctions. (search for similar items in EconPapers)
Pages: 33 pages
Date: 2011-01
New Economics Papers: this item is included in nep-cta
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Citations: View citations in EconPapers (1)

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Working Paper: Information Disclosure in Procurement Auctions with Horizontally Differentiated Suppliers (2011)
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