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Communication of preferences in contests for contracts

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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.

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Authors and Affiliations

  1. Department of Economics, University of Exeter Business School, Exeter, EX44PU, UK

    Todd R. Kaplan

  2. Department of Economics, University of Haifa, Haifa, 31905, Israel

    Todd R. Kaplan

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  1. Todd R. Kaplan
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Correspondence to Todd R. Kaplan.

Additional information

I wish to thank Martin Beckman, Dan Kovenock, John Maloney, Amnon Shalom an anonymous referee, and seminar participants at the CESifo Venice Summer Institute on Advances in the Theory of Contests and its Applications for useful comments.

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Kaplan, T.R. Communication of preferences in contests for contracts. Econ Theory 51, 487–503 (2012). https://doi.org/10.1007/s00199-010-0525-2

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  • DOI: https://doi.org/10.1007/s00199-010-0525-2

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