Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/194029
Authors: 
Herweg, Fabian
Schmidt, Klaus M.
Year of Publication: 
2018
Series/Report no.: 
Discussion Paper 133
Abstract: 
We consider a multi-dimensional procurement problem in which sellers have private information about their costs and about a possible design flaw. The information about the design flaw is necessarily correlated. We solve for the optimal Bayesian procurement mechanism that implements the efficient allocation under the constraint that sellers are protected by limited liability. We show that the rents obtained from reporting costs truthfully can be used to reduce the rents sellers must get for reporting the flaw. We compare the optimal Bayesian mechanism to the optimal ex post incentive compatible mechanism that is informationally less demanding.
Subjects: 
Auction
Correlated Types
Inefficient Renegotiation
Multidimensional Screening
Procurement
JEL: 
D44
D47
D82
H57
Document Type: 
Working Paper
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