Biased procurement auctions

Abstract In a complex procurement a buyer may consider biasing the auction rules in order to account for differences in product characteristics offered by the sellers. This paper studies the gathering, disclosure and use of information about this bias. While we also describe the optimal procurement auction in our setting, the main focus of the paper is on the case where the buyer does not have commitment power. We find that without commitment full disclosure of the buyer's preferences is optimal. Furthermore, lack of commitment distorts the buyer's incentives to learn about its preferences: unlike the commitment case, without commitment the value of this information can be negative. JEL Codes: D44, D82, H57, L14, L15