On Discrimination in Procurement Auctions

48 Pages Posted: 2 Jun 2014

See all articles by Philippe Jehiel

Philippe Jehiel

University College London - Department of Economics; Ecole Nationale des Ponts et Chaussées (ENPC) - Centre d'Enseignement et de Recherche en Analyse Socio-Economique (CERAS); Centre for Economic Policy Research (CEPR)

Laurent Lamy

Paris School of Economics (PSE)

Date Written: January 2014

Abstract

With exogenous participation, strong bidders should be discriminated against weak bidders to maximize revenues (Myerson 1981). When participation is endogenous and the set of potential entrants is large, optimal discrimination if any takes a very different form. Without incumbents, there should be no discrimination even if entrants come from groups with different characteristics. With incumbents, those should be discriminated against entrants no matter how strong/weak they are even if some share of their surplus is internalized by the designer. The optimal reserve policy in standard auctions is also analyzed to shed light on situations in which discrimination is not permitted.

Keywords: asymmetric buyers, auctions with endogenous entry, bid preference programs, cartels, favoritism, government procurement, incumbents, optimal auction design, Poisson games

JEL Classification: D44, H57, L10

Suggested Citation

Jehiel, Philippe and Lamy, Laurent, On Discrimination in Procurement Auctions (January 2014). CEPR Discussion Paper No. DP9790, Available at SSRN: https://ssrn.com/abstract=2444788

Philippe Jehiel (Contact Author)

University College London - Department of Economics ( email )

Gower Street
London WC1E 6BT, WC1E 6BT
United Kingdom

Ecole Nationale des Ponts et Chaussées (ENPC) - Centre d'Enseignement et de Recherche en Analyse Socio-Economique (CERAS) ( email )

28, rue des Saints-Peres
75007 Paris
France
+33 1 4458 2873 (Phone)
+33 1 4458 2880 (Fax)

Centre for Economic Policy Research (CEPR)

London
United Kingdom

Laurent Lamy

Paris School of Economics (PSE) ( email )

48 Boulevard Jourdan
Paris, 75014 75014
France

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