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The B.E. Journal of Theoretical Economics

Editor-in-Chief: Schipper, Burkhard

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Optimal Use of Rewards as Commitment Device When Bidding Is Costly

Luke Hu
Published Online: 2013-05-29 | DOI: https://doi.org/10.1515/bejte-2012-0015


This paper considers procurement auctions with costly bidding when the auctioneer is unable to commit himself to restrict the number of bidders. The auctioneer can, however, publicly pledge to pay a financial reward to every contractor he has invited to bid, as an indirect commitment device. Rewards for short-listed bidders are costly. Nevertheless, it is generally optimal for the procurer to credibly implement the same restriction of the number of bidders that is optimal under full commitment.

Keywords: procurement; auctions; industrial organization; mechanism design


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About the article

Published Online: 2013-05-29

Published in Print: 2013-01-01

Citation Information: The B.E. Journal of Theoretical Economics, Volume 13, Issue 1, Pages 179–189, ISSN (Online) 1935-1704, ISSN (Print) 2194-6124, DOI: https://doi.org/10.1515/bejte-2012-0015.

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