Journal of Economics

, Volume 114, Issue 3, pp 211–238 | Cite as

Information policies in procurement auctions with heterogeneous suppliers

  • Domenico Colucci
  • Nicola DoniEmail author
  • Vincenzo Valori


This work studies a reverse auction in which a buyer needs to acquire a given good or service from suppliers having different costs. The sellers are characterized by qualities that are the buyer’s private information. Comparing the outcomes of different policies regarding the revelation of such information prior to the auction, we find that maximizing the procurer’s expected utility requires either concealing or privately revealing the suppliers’ quality, depending on the degree of heterogeneity in costs and qualities. Asymmetric revelation, if allowed, increases the buyer’s expected utility when costs differences are large. Conversely social efficiency calls for public disclosure of qualities. Hence there is a trade-off between efficiency and rent extraction by which the buyer has incentive to withhold information that would benefit social welfare.


Multidimensional auctions Procurement policies Information revelation Asymmetric auctions 

JEL Classification

D44 D82 H57 


  1. An MY (1998) Logconcavity versus logconvexity: a complete characterization. J Econ Theory 50(2):350–369CrossRefGoogle Scholar
  2. Anderson SP, Renault R (2009) Comparative advertising: disclosing horizontal match information. Rand J Econ 40(3):558–581CrossRefGoogle Scholar
  3. Bagnoli M, Bergstrom T (2005) Log-concave probability and its applications. Econ Theory 26(2):445–469CrossRefGoogle Scholar
  4. Chafkin M (2007) How to compete in a reverse auction. Inc. magazine (2007) Retrieved from in Feb 2012
  5. Che YK (1993) esign competition through multidimensional auction. Rand J Econ 24(4):668–680CrossRefGoogle Scholar
  6. Corns A, Schotter A (1999) Can affirmative action be cost effective? An experimental examination of price-preference auctions. Am Econ Rev 89(1):291–305CrossRefGoogle Scholar
  7. Doni N, Menicucci D (2010) A note on information revelation in procurement auctions. Econ Lett 108(3):307–310CrossRefGoogle Scholar
  8. Doni N, Menicucci D (2011) Information revelation in procurement auctions with two-sided asymmetric information. J Econ Manag Strat. Available at
  9. Engelbrecht-Wiggans R, Haruvy E, Katok E (2007) A comparison of buyer-determined and price-based multiattribute mechanisms. Mark Sci 26(5):629–641CrossRefGoogle Scholar
  10. Ganuza JJ (2004) Ignorance promotes competition: an auction model with endogenous private valuations. Rand J Econ 35(3):583–598CrossRefGoogle Scholar
  11. Gal-Or E, Gal-Or M, Dukes A (2007) Optimal information revelation in procurement schemes. Rand J Econ 38(2):400–418CrossRefGoogle Scholar
  12. General Service Administration (2002) Reverse auction: user’s guide. Retrieved from in Nov 2010
  13. Grimm V (2007) Sequential versus bundle auctions for recurring procurement. J Econ 90(1):1–27CrossRefGoogle Scholar
  14. Haruvy E, Katok E (2013) Increasing revenue by decreasing information in procurement auctions. Prod Oper Manag 22(1):19–35Google Scholar
  15. Hubbard TP, Paarsch HJ (2009) Investigating bid preferences at low-price, sealed-bid auctions with endogenous participation. Int J Ind Organ 27(1):1–14CrossRefGoogle Scholar
  16. Kaplan T, Zamir S (2011) Multiple equilibria in asymmetric first-price auctions. Mimeo. Available at
  17. Kirkegaard R (2012) A mechanism design approach to ranking asymmetric auctions. Econometrica 80(5):2349–2364CrossRefGoogle Scholar
  18. Kostamis D, Beil DR, Duenyas I (2009) Total-cost procurement auctions: impact of suppliers’ sost adjustments on auction format choice. Manag Sci 55(12):1985–1999CrossRefGoogle Scholar
  19. Laffont J-J, Tirole J (1987) Auctioning incentive contracts. J Political Econ 95(5):921–937CrossRefGoogle Scholar
  20. Li H, Riley JG (2007) Auction choice. Int J Ind Organ 25(6):1269–1298CrossRefGoogle Scholar
  21. Maskin E, Riley JG (2000) Asymmetric auctions. Rev Econ Stud 67(3):413–438CrossRefGoogle Scholar
  22. Milgrom PR, Weber RJ (1982) A theory of auctions and competitive bidding. Econometrica 50(5):1089–1122CrossRefGoogle Scholar
  23. Olympic Delivery Authority (2007) Procurement policy. Retrieved from in Feb 2012
  24. Perloff J, Salop S (1985) Equilibrium with product differentiation. Rev Econ Stud 52(1):107–120CrossRefGoogle Scholar
  25. Rezende L (2009) Biased procurement auctions. Econ Theory 38(1):169–185CrossRefGoogle Scholar
  26. Rothkopf MH, Harstad RM, Fu Y (2003) Is subsidizing inefficient bidders actually costly? Manag Sci 49(1):71–84CrossRefGoogle Scholar
  27. Rothkopf MH, Whinston AB (2007) On E-auctions for procurement operations. Prod Oper Manag 16(4):404–408CrossRefGoogle Scholar
  28. Teich JE, Wallenius H, Wallenius J, Koppius OR (2004) Emerging multiple issue e-auctions. Eur J Oper Res 159(1):1–16CrossRefGoogle Scholar
  29. Thomas CJ, Wilson BJ (2014) Horizontal product differentiation in auctions and multilateral negotiations. Economica 81(322). doi: 10.1111/ecca.12090

Copyright information

© Springer-Verlag Wien 2014

Authors and Affiliations

  • Domenico Colucci
    • 1
  • Nicola Doni
    • 1
    Email author
  • Vincenzo Valori
    • 1
  1. 1.University of FirenzeFlorenceItaly

Personalised recommendations