Bayesian implementation and rent extraction in a multi-dimensional procurement problem

Title data

Herweg, Fabian ; Schmidt, Klaus M.:
Bayesian implementation and rent extraction in a multi-dimensional procurement problem.
In: International Journal of Industrial Organization. Vol. 70 (2020) . - No. 102521.
ISSN 0167-7187
DOI: https://doi.org/10.1016/j.ijindorg.2019.06.003

Official URL:

Abstract in another language

We consider a multi-dimensional procurement problem in which sellers have private information about their costs and about a possible design flaw. The information about the design flaw is necessarily correlated. We solve for the Bayesian procurement mechanism that implements the efficient allocation at the lowest cost under the constraint that sellers are protected by limited liability. We show that the rents obtained from reporting costs truthfully can be used to reduce the rents sellers must get for reporting the flaw. We compare the efficient Bayesian mechanism to the efficient ex post incentive compatible mechanism studied by Herweg and Schmidt (2019) that is informationally less demanding.

Further data

Item Type:	Article in a journal
Refereed:	Yes
Keywords:	Auction; Correlated types; Inefficient renegotiation; Multidimensional screening; Procurement
Subject classification:	JEL classification: D44; D47; D82; H57
Institutions of the University:	Faculties > Faculty of Law, Business and Economics > Department of Economics > Chair Economics VIII: International Competition Policy Faculties > Faculty of Law, Business and Economics > Department of Economics > Chair Economics VIII: International Competition Policy > Chair Economics VIII: International Competition Policy - Univ.-Prof. Dr. Fabian Herweg Faculties Faculties > Faculty of Law, Business and Economics Faculties > Faculty of Law, Business and Economics > Department of Economics
Result of work at the UBT:	Yes
DDC Subjects:	300 Social sciences 300 Social sciences > 330 Economics
Date Deposited:	05 Nov 2020 07:30
Last Modified:	15 Sep 2022 07:13
URI:	https://eref.uni-bayreuth.de/id/eprint/59217