Optimal Procurement with Quality Concerns

• 成果类型: Article
• 署名作者: Lopomo, Giuseppe; Persico, Nicola; Villa, Alessandro T.
• 署名单位: Duke University; Northwestern University; National Bureau of Economic Research; Federal Reserve System - USA; Federal Reserve Bank - Chicago
• 刊物名称: AMERICAN ECONOMIC REVIEW
• ISSN/ISSBN: 0002-8282
• DOI: 10.1257/aer.20211437
• 发表日期: 2023
• 页码: 1505-1529
• 关键词: Auctions; price; MODEL; bids

摘要

Adverse selection in procurement arises when low-cost bidders are also low-quality suppliers. We propose a mechanism called LoLA (lowball lottery auction) which, under some conditions, maximizes any combination of buyer's and social surplus, subject to incentive compatibility, in the presence of adverse selection. The LoLA features a floor price, and a reserve price. The LoLA has a dominant strategy equilibrium that, under mild conditions, is unique. In a counterfac-tual analysis of Italian government auctions, we compute the gain that the government could have made, had it used the optimal pro-curement mechanism (a LoLA), relative to a first-price auction (the adopted format).