Probabilistic Procurement Auctions

21 Pages Posted: 19 Jul 2013

See all articles by Thomas Giebe

Thomas Giebe

Linnaeus University - Department of Economics and Statistics

Paul Schweinzer

University of Klagenfurt

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Date Written: July 17, 2013


We analyse procurement auctions in which sellers are distinguished on the basis of the ratios of quality per unit of money that they offer. Sellers are privately informed on the offered quality of the technology or good. We assume that the procurer cannot perfectly identify the best offer. Thus, with positive and decreasing probability, the second, third, etc. best ratio offered is selected as the winner of the auction. We model the decision process as based on a general noisy ranking of offers. We show that, although the problem seems to be analytically intractable in general, there exists a simple symmetric, pure-strategy equilibrium in which everyone follows the simple heuristic to match the same ‘focal’ price-quality ratio.

Keywords: auctions, contests, price-quality ratio, procurement, scoring

JEL Classification: C700, D700, H570

Suggested Citation

Giebe, Thomas and Schweinzer, Paul, Probabilistic Procurement Auctions (July 17, 2013). CESifo Working Paper Series No. 4320, Available at SSRN: or

Thomas Giebe

Linnaeus University - Department of Economics and Statistics ( email )

Växjö, 351 06

Paul Schweinzer (Contact Author)

University of Klagenfurt ( email )

Universitätsstrasse 65-67
Klagenfurt, Carinthia A-9020

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