Optimal procurement with quality concerns

Arbeitspapier

Adverse selection in procurement arises when low-cost bidders are also lowquality suppliers. We propose a mechanism called LoLA which, under some conditions, is the best incentive-compatible mechanism for maximizing either the seller's or the social surplus in the presence of adverse selection. The LoLA features a floor (or minimum) price, and a reserve (or maximum) price. Conveniently, the LoLA has a dominant strategy equilibrium that, under mild regularity conditions, is unique. We perform a counterfactual experiment on Italian government procurement auctions: we compute the gain that the government could have made, had it used the optimal mechanism (which happens to be a LoLA), relative to a first-price auction, which is the format the government actually used. Finally, we provide software applications for computing the optimal procurement mechanism.

Angaben zum Objekt

• Sprache: Englisch

Verweise und Beziehungen

• Erschienen in: Series: Working Paper ; No. WP 2022-21

Klassifikation und Themen

• Klassifikation: Wirtschaft
• Thema: Procurement Auctions ; Mechanism Design ; Auctions ; Asymmetric and Private Information ; Mechanism Design

Beteiligte, Orts- und Zeitangaben

• Ereignis: Geistige Schöpfung
• (wer): Lopomo, Giuseppe ; Persico, Nicola ; Villa, Alessandro T.
• Ereignis: Veröffentlichung
• (wer): Federal Reserve Bank of Chicago
• (wo): Chicago, IL
• (wann): 2022

Weitere Informationen

• DOI: doi:10.21033/wp-2022-21
• Handle: http://hdl.handle.net/10419/264335
• Letzte Aktualisierung: 10.03.2025, 11:42 MEZ