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All Pay Quality-Bids in Score Procurement Auctions

Author

Listed:
  • Dan Kovenock

    (Economic Science Institute, Chapman University)

  • Jingfeng Lu

    (Department of Economics, National University of Singapore)

Abstract

In this paper, we study score procurement auctions with all-pay quality bids. A supplierís score is the di§erence between his quality and price bids. The supplier with the highest score wins and gets paid his own price bid. The procurerís payo§ is the di§erence between the winnerís quality and the procurerís payments to the suppliers. Equilibrium quality and price bids are solved without Örst obtaining the corresponding equilibrium scores. We Önd that quality bids, the suppliersípayo§s and the procurerís payo§ do not depend on whether price bids are made contingent on quality bids. Compared to a benchmark of winner-pay quality bids, in which the losing suppliersí quality bidding costs are reimbursed by the procurer, all-pay quality bids tend to reduce quality provision and suppliersípayo§s, but they tend to increase the total surplus and the procurerís payo§.

Suggested Citation

  • Dan Kovenock & Jingfeng Lu, 2020. "All Pay Quality-Bids in Score Procurement Auctions," Working Papers 20-01, Chapman University, Economic Science Institute.
    • Handle: RePEc:chu:wpaper:20-01
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    File URL: https://digitalcommons.chapman.edu/esi_working_papers/293/
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    More about this item

    Keywords

    All-pay quality bids; Equilibrium analysis; Score auctions; Score procurements; Winner-pay quality bid;
    All these keywords.

    JEL classification:

    • C70 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - General
    • D44 - Microeconomics - - Market Structure, Pricing, and Design - - - Auctions
    • D89 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Other
    • L12 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Monopoly; Monopolization Strategies
    • O32 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Management of Technological Innovation and R&D

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