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Hu, Luke (February 2012): Optimal Use of Rewards as Commitment Device When Bidding is Costly. SFB/TR 15 Discussion Paper No. 377 [PDF, 154kB]


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, offer a financial reward to be paid to every short-listed bidders 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.

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