Budget Feasible Procurement Auctions (original) (raw)

Combinatorial auctions with budgets

2010

We consider budget constrained combinatorial auctions where bidder i has a private value v i for each of the items in some set S i , agent i also has a budget constraint b i. The value to agent i of a set of items R is |R ∩ S i | • v i. Such auctions capture adword auctions, where advertisers offer a bid for those adwords that (hopefully) reach their target audience, and advertisers also have budgets. It is known that even if all items are identical and all budgets are public it is not possible to be truthful and efficient. Our main result is a novel auction that runs in polynomial time, is incentive compatible, and ensures Pareto-optimality. The auction is incentive compatible with respect to the private valuations, v i , whereas the budgets, b i , and the sets of interest, S i , are assumed to be public knowledge. This extends the result of Dobzinski et al. [3, 4] for auctions of multiple identical items and public budgets to single-valued combinatorial auctions with public budgets.

Procurement auctions with entry of bidders

International Journal of Industrial Organization, 2000

In procurement auctions with a fixed number of bidders there is a tradeoff between cost efficiency and rent extraction. An optimal mechanism, therefore, entails distortions of effort . If potential suppliers must sink an entry investment before they can participate in the auction, then decreasing the firms' rent may imply reduced entry. We show that if potential bidders are uninformed before entry, commitment to a plain, nondistortive auction is optimal. In contrast, if potential bidders learn all their private information before entry, the optimal mechanism entails the same distortions as in Laffont and Tirole's static model.

Multiple-Object Auctions with Budget Constrained Bidders

The Review of Economic Studies, 2001

A seller with two objects faces a group of bidders who are subject to budget constraints. The objects have common values to all bidders but need not be identical, and may be either complements or substitutes. In a simple complete information setting we show: (1) if the objects are sold by means of a sequence of open ascending auctions, then it is always optimal to sell the more valuable object first; (2) the sequential auction yields more revenue than the simultaneous ascending auction used recently by the FCC if the discrepancy in the values is large, or if there are significant complementarities; (3) a hybrid simultaneous-sequential form is revenue superior to the sequential auction; and (4) budget constraints arise endogenously. 157 be said to face constraints on borrowing or liquidity, this is less clear for these larger bidders. Indeed, Salant (1997, p. 553) writes that the bidding team first assessed the values of licenses that GTE was eligible to bid on and the ''budget parameters determined by GTE's management were in part based on these valuations''. [Emphasis added.] Thus it seems that for the larger bidders the budget constraints were endogenously determined. The companies gave their bidding teams instructions not to spend more than a specified amount.

Optimal Auctions of Procurement Contracts

Organizational Economics Proceedings, 2014

We consider tenders/auctions for the procurement of items that do not exist at the time of the tender. The cost of production is subject to ex-post shocks, i.e. cost overruns, which cannot be contracted away or insured at the time of tender. The contractors may default due to the cost overruns once the project is underway. We consider a simple contract that speci…es the payment in case of default and the award that is paid upon successful project completion. This contract is allocated at the tender and the award part is determined by competitive bidding. We characterize bidding behavior of contractors in standard tenders and derive the implications for the buyer's expected cost minimization.

Procurement with costly bidding, optimal shortlisting, and rebates

Economics Letters, 2008

We consider the procurement of a complex, indivisible good when bid preparation is costly, assuming a population of heterogeneous contractors. Shortlisting is introduced to implement the optimal number of bidders, and we explore whether the procurer should reimburse the nonrecoverable cost of preparing a bid in whole or in part. We find that a reimbursement policy is profitable for the procurer only if performance and bidding costs are negatively correlated. Moreover, negative rebates (entry fees) always dominate positive rebates.

Optimal Procurement with Quality Concerns

SSRN Electronic Journal

Adverse selection in procurement arises when low-cost bidders are also lowquality suppliers. We propose a mechanism called LoLA which, under some conditions, is the best incentive-compatible mechanism for maximizing either the seller's or the social surplus in the presence of adverse selection. The LoLA features a floor (or minimum) price, and a reserve (or maximum) price. Conveniently, the LoLA has a dominant strategy equilibrium that, under mild regularity conditions, is unique. We perform a counterfactual experiment on Italian government procurement auctions: we compute the gain that the government could have made, had it used the optimal mechanism (which happens to be a LoLA), relative to a first-price auction, which is the format the government actually used. Finally, we provide software applications for computing the optimal procurement mechanism. * We thank Jim Anton, and seminar participants at the EIEF and Duke University. Excellent research assistance by Chenxi Xu is gratefully acknowledged. Special thanks to Francesco Decarolis for generously sharing the data on which Section 5 is based, and to Giancarlo Spagnolo for helpful feedback.

Multi-unit auctions with budget-constrained bidders

2005

We study a multi-unit auction with multiple bidders, each of whom has a private valuation and a budget. The truthful mechanisms of such an auction are characterized, in the sense that, under standard assumptions, we prove that it is impossible to design a non-trivial truthful auction which allocates all units, while we provide the design of an asymptotically revenue-maximizing truthful mechanism which may allocate only some of the units. Our asymptotic parameter is a budget dominance parameter which measures the size of the budget of a single agent relative to the maximum revenue. We discuss the relevance of these results for the design of Internet ad auctions.

Optimal and Efficient Parametric Auctions

Proceedings of the Twenty-Fourth Annual ACM-SIAM Symposium on Discrete Algorithms, 2013

Consider a seller who seeks to provide service to a collection of interested parties, subject to feasibility constraints on which parties may be simultaneously served. Assuming that a distribution is known on the value of each party for service-arguably a strong assumption-Myerson's seminal work provides revenue optimizing auctions [12]. We show instead that, for very general feasibility constraints, only knowledge of the median of each party's value distribution, or any other quantile of these distributions, or approximations thereof, suffice for designing simple auctions that simultaneously approximate both the optimal revenue and the optimal welfare. Our results apply to all downward-closed feasibility constraints under the assumption that the underlying, unknown value distributions are monotone hazard rate, and to all matroid feasibility constraints under the weaker assumption of regularity of the underlying distributions. Our results jointly generalize the single-item results obtained by Azar and Micali [2] on parametric auctions, and Daskalakis and Pierrakos [6] for simultaneously approximately optimal and efficient auctions.

Optimal Two-stage Auctions with Costly Information Acquisition ¤

2013

We consider a two-stage auction environment with costly entry wherein the cost mainly stems from information acquisition. Bidders are endowed with original estimates (“types”) about their private values, and can further learn their true values of the object for sale by incurring an entry cost. We show that optimality of the generalized Myerson allocation rule is robust to this sequential screening setting with costly entry. Optimal entry is thus to admit the set of bidders that maximizes expected virtual surplus adjusted by both the second-stage signal and entry cost. We also show that the optimal mechanism can be implemented via a two-stage auction that is essentially a handicap auction augmented with an entry mechanism.