Information Revelation in Procurement Auctions with Two‐Sided Asymmetric Information

Abstract

A buyer needs to procure a good from one of two suppliers offering differentiated products and with privately observed costs. The buyer privately observes the own valuations for the products and (ex ante) decides how much of this information should be revealed to suppliers before they play a first score auction. Our main result is that the more significant is each supplier's private information on the own cost, the less information the buyer should reveal. We also examine the buyer's incentives to make untruthful announces.

How the Nature of Product Differentiation Affects Procurement Competition

“… It is worth noting that find analytic solutions for the private preference setting in a model in which the buyer's preferences are uniformly distributed, sellers' costs can take on only two values, and an arbitrary trade always generates positive surplus. Even in this simplified environment they can find analytic solutions only for a subset of cases, and the solutions can be quite complicated.…”