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Optimal procurement mechanism with observable quality

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  • Ganuza, Juan-José

Abstract

In a procurement contract the Administration usually has some prior information about the quality of the bidding firms. The goal of this article is to characterize the optimal mechanism in such a situation, when firms have private information about their costs. The optimal mechanism selects low-quality firms more often than it would be efficient with perfect information. We also compare this mechanism with others frequently used by the Spanish Administration such as the first price sealed bid auction and the previous admission auction.

Suggested Citation

  • Ganuza, Juan-José, 1995. "Optimal procurement mechanism with observable quality," UC3M Working papers. Economics 3963, Universidad Carlos III de Madrid. Departamento de Economía.
    • Handle: RePEc:cte:werepe:3963
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    References listed on IDEAS

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    1. McAfee, R. Preston & McMillan, John, 1989. "Government procurement and international trade," Journal of International Economics, Elsevier, vol. 26(3-4), pages 291-308, May.
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    Cited by:

    1. Karca D. Aral & Damian R. Beil & Luk N. Van Wassenhove, 2021. "Supplier Sustainability Assessments in Total‐Cost Auctions," Production and Operations Management, Production and Operations Management Society, vol. 30(4), pages 902-920, April.

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