This paper addresses two important issues in public procurement: ex ante uncertainty about the participating agents’ qualities and costs and their strategic behaviour. We present a novel multi-dimensional auction that incentivises agents to make a partial inquiry into the procured task and to honestly report quality-cost probabilistic estimates based on which the principal can choose the agent that offers the best value for money. The mechanism extends second score auction design to settings where the quality is uncertain and it provides incentives to both collect information and deliver desired qualities.
- Information asymmetry
- Uncertainty modelling
- Quality and cost uncertainty
- Strictly proper scoring rules
Papakonstantinou, A., & Bogetoft, P. (2017). Multi-dimensional Procurement Auction Under Uncertain and Asymmetric Information. European Journal of Operational Research, 258(3), 1171-1180. https://doi.org/10.1016/j.ejor.2016.09.060