Information Provision in Procurement Auctions

Author(s)
Joaquin Coleff, Daniel Garcia
Abstract

We study the optimal provision of information in a procurement auction with horizontally differentiated 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 inefficient since they reduce total and consumer surplus, gross of entry costs. We show that the buyer will not find it optimal to send public information to all sellers. On the other hand, she may profit 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.

Organisation(s)
Department of Economics
External organisation(s)
Del Rosario University
Journal
Journal of Public Economic Theory
Volume
19
Pages
426–444
No. of pages
19
ISSN
1097-3923
DOI
https://doi.org/10.1111/jpet.12217
Publication date
08-2016
Peer reviewed
Yes
Austrian Fields of Science 2012
502024 Public economy
Keywords
ASJC Scopus subject areas
Economics and Econometrics, Finance, Sociology and Political Science
Portal url
https://ucris.univie.ac.at/portal/en/publications/information-provision-in-procurement-auctions(eb846bce-0ec5-4b5d-9956-3f8db6ddde27).html