2025/04/22 by Kun Zhang, Zhang, Kun
Business, Management and Accounting · #FOS: Economics and business #Public Procurement and Policy #Supply Chain and Inventory Management #Sustainable Supply Chain Management #Theoretical Economics (econ.TH)
paper · pdf · doi:10.48550/arxiv.2504.15555
openalex publication_date 2025/04/22 · openalex created_date 2025/10/10 · openalex updated_date 2026/07/28
Standard procurement models assume that the buyer knows the quality of the good at the time of procurement; however, in many settings, the quality is learned only long after the transaction. We study procurement problems in which the buyer's valuation of the supplied good depends directly on its quality, which is unverifiable and unobservable to the buyer. For a broad class of procurement problems, we identify procurement mechanisms maximizing any weighted average of the buyer's expected payoff and social surplus. The optimal mechanism can be implemented via an auction that restricts sellers to submitting bids within specific intervals.