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Communication of Preferences in Contests for Contracts

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  • Kaplan, Todd R

Abstract

This paper models a contest where several sellers compete for a contract with a single buyer. There are several styles of possible designs with a subset of them preferred by the buyer. We examine what happens when the buyer communicates information about his preferences. If the sellers are unable to change their style, then there is no effect on the welfare of the sellers. If the sellers are able to make adjustments, extra information may either boost or damage the sellers' profits. While the chance that there will be a proposal of a style preferred by the buyer cannot decrease, the buyer's surplus may increase or decrease.

Suggested Citation

  • Kaplan, Todd R, 2008. "Communication of Preferences in Contests for Contracts," MPRA Paper 18696, University Library of Munich, Germany, revised 08 Aug 2009.
    • Handle: RePEc:pra:mprapa:18696
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    References listed on IDEAS

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    7. Todd R. Kaplan & David Wettstein, 2006. "Caps on Political Lobbying: Comment," American Economic Review, American Economic Association, vol. 96(4), pages 1351-1354, September.
    8. Kaplan, Todd R. & Luski, Israel & Wettstein, David, 2003. "Innovative activity and sunk cost," International Journal of Industrial Organization, Elsevier, vol. 21(8), pages 1111-1133, October.
    9. Yeon-Koo Che & Ian L. Gale, 2008. "Caps on Political Lobbying," Springer Books, in: Roger D. Congleton & Kai A. Konrad & Arye L. Hillman (ed.), 40 Years of Research on Rent Seeking 2, pages 337-345, Springer.
    10. Steven C. Salop, 1979. "Monopolistic Competition with Outside Goods," Bell Journal of Economics, The RAND Corporation, vol. 10(1), pages 141-156, Spring.
    11. Todd Kaplan, 2006. "Why banks should keep secrets," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 27(2), pages 341-357, January.
    12. Dirk Bergemann & Juuso Valimaki, 2002. "Information Acquisition and Efficient Mechanism Design," Econometrica, Econometric Society, vol. 70(3), pages 1007-1033, May.
    13. Lee, Tom K., 1985. "Competition and information acquisition in first price auctions," Economics Letters, Elsevier, vol. 18(2-3), pages 129-132.
    14. Jean-Jacques Laffont & Jean Tirole, 1993. "A Theory of Incentives in Procurement and Regulation," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262121743, December.
    15. Nicola Persico, 2000. "Information Acquisition in Auctions," Econometrica, Econometric Society, vol. 68(1), pages 135-148, January.
    16. Milgrom, Paul R & Weber, Robert J, 1982. "A Theory of Auctions and Competitive Bidding," Econometrica, Econometric Society, vol. 50(5), pages 1089-1122, September.
    17. Amann, Erwin & Leininger, Wolfgang, 1996. "Asymmetric All-Pay Auctions with Incomplete Information: The Two-Player Case," Games and Economic Behavior, Elsevier, vol. 14(1), pages 1-18, May.
    18. Alex Gershkov, 2009. "Optimal auctions and information disclosure," Review of Economic Design, Springer;Society for Economic Design, vol. 13(4), pages 335-344, December.
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    Cited by:

    1. Kai Konrad & Dan Kovenock, 2012. "Introduction," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 51(2), pages 241-245, October.
    2. Nicola Doni & Domenico Menicucci, 2014. "Information Revelation in Procurement Auctions with Two‐Sided Asymmetric Information," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 23(4), pages 952-968, December.
    3. Todd R. Kaplan & David Wettstein, 2022. "Two-stage contests with preferences over style," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 74(4), pages 1141-1161, November.
    4. Helmuts Āzacis & Péter Vida, 2015. "Collusive communication schemes in a first-price auction," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 58(1), pages 125-160, January.
    5. Schmutzler, Armin & Letina, Igor, 2015. "Designing Innovation Contests for Diversity," CEPR Discussion Papers 10736, C.E.P.R. Discussion Papers.
    6. Fischer, Sven & Guth, Werner & Kaplan, Todd & Zultan, Roi, 2014. "Auctions and Leaks: A Theoretical and Experimental Investigation," MPRA Paper 58940, University Library of Munich, Germany.
    7. Igor Letina & Armin Schmutzler, 2019. "Inducing Variety: A Theory Of Innovation Contests," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 60(4), pages 1757-1780, November.
    8. Chen, Zhuoqiong, 2021. "Optimal information exchange in contests," Journal of Mathematical Economics, Elsevier, vol. 96(C).
    9. Zhuoqiong Chen, 2021. "All-pay auctions with private signals about opponents’ values," Review of Economic Design, Springer;Society for Economic Design, vol. 25(1), pages 33-64, June.
    10. Sven Fischer & Werner Güth & Todd R. Kaplan & Ro'i Zultan, 2021. "Auctions With Leaks About Early Bids: Analysis And Experimental Behavior," Economic Inquiry, Western Economic Association International, vol. 59(2), pages 722-739, April.
    11. Fischer, Sven & Guth, Werner & Kaplan, Todd & Zultan, Roi, 2014. "Auctions and Leaks: A Theoretical and Experimental Investigation," MPRA Paper 58940, University Library of Munich, Germany.

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    More about this item

    Keywords

    Contests; Procurement; Communication;
    All these keywords.

    JEL classification:

    • H57 - Public Economics - - National Government Expenditures and Related Policies - - - Procurement
    • D44 - Microeconomics - - Market Structure, Pricing, and Design - - - Auctions

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