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Efficient procurement with quality concerns*

Published online by Cambridge University Press:  17 August 2016

Lionel Thomas
Affiliation:
CRESE, Université de Franche-Comté, France
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Abstract:

In this paper, we design the optimal procurement mechanisms when bidders are privately informed on efficiency and on observable but neither verifiable nor contractible quality. We show that most of the optimal procurement institutions are mixed procedure implying both separation and pooling. Thus, the existing take-it-or-leave-it offers and procurement auction appear only as polar cases. Moreover, we show that separation and pooling may affect the allocative efficiency of the procurement in a counterintuitive way, such that a less bunching mechanism can be a more inefficient one.

Type
Research Article
Copyright
Copyright © Université catholique de Louvain, Institut de recherches économiques et sociales 2006

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