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Scoring Auction by an Informed Principal
Abstract
This paper considers a scoring auction used in procurement. In this auction, each supplier offers both price and quality, and a supplier whose offer achieves the highest score wins. The environment we consider has two features: the buyer has private information and quality is multi-dimensional. We show that a scoring auction implements the ex ante optimal mechanism for the buyer when the value complementarity between quality attributes is sufficiently greater than the cost substitutability. We further show how the buyer should design scoring rules.
