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Strategic Ignorance in Sequential Procurement

Author

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  • Silvana Krasteva
  • Huseyin Yildirim

Abstract

Should a buyer approach sellers of complementary goods informed or uninformed of her private valuations, and if informed, in which sequence? In this paper, we show that an informed buyer would start with the high-value seller to minimize future holdup. Informed (or careful) sequencing may, however, hurt the buyer as sellers "read" into it. The buyer may, therefore, commit to ignorance, perhaps, by overloading herself with unrelated tasks, delegating the sequencing decision, or letting sellers self-schedule. Absent such commitment, we show that ignorance is not time-consistent for the buyer, but it increases trade. Evidence on land assembly supports our findings.

Suggested Citation

  • Silvana Krasteva & Huseyin Yildirim, 2019. "Strategic Ignorance in Sequential Procurement," American Economic Journal: Microeconomics, American Economic Association, vol. 11(2), pages 131-172, May.
    • Handle: RePEc:aea:aejmic:v:11:y:2019:i:2:p:131-72
    Note: DOI: 10.1257/mic.20170076
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    Citations

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    Cited by:

    1. Derek J. Clark & Jean-Christophe Pereau, 2021. "Group bargaining in supply chains," Review of Economic Design, Springer;Society for Economic Design, vol. 25(3), pages 111-138, September.
    2. Uyanik, Metin & Yengin, Duygu, 2023. "Expropriation power in private dealings: Quota rule in collective sales," Games and Economic Behavior, Elsevier, vol. 141(C), pages 548-580.
    3. Jiawei Li & Tianxiang Cui & Graham Kendall, 2022. "Equilibrium in a Bargaining Game of Two Sellers and Two Buyers," Mathematics, MDPI, vol. 10(15), pages 1-9, July.
    4. Chen, Ying & Zápal, Jan, 2022. "Sequential vote buying," Journal of Economic Theory, Elsevier, vol. 205(C).

    More about this item

    JEL classification:

    • D11 - Microeconomics - - Household Behavior - - - Consumer Economics: Theory
    • D81 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Criteria for Decision-Making under Risk and Uncertainty
    • D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design
    • D83 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Search; Learning; Information and Knowledge; Communication; Belief; Unawareness

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