All Pay Quality-Bids in Score Procurement Auctions

Abstract

In this paper, we study score procurement auctions with all-pay quality bids. A supplieris score is the di§erence between his quality and price bids. The supplier with the highest score wins and gets paid his own price bid. The procureris payo§ is the di§erence between the winneris quality and the procureris payments to the suppliers. Equilibrium quality and price bids are solved without Orst obtaining the corresponding equilibrium scores. We Ond that quality bids, the suppliersipayo§s and the procureris payo§ do not depend on whether price bids are made contingent on quality bids. Compared to a benchmark of winner-pay quality bids, in which the losing suppliersi quality bidding costs are reimbursed by the procurer, all-pay quality bids tend to reduce quality provision and suppliersipayo§s, but they tend to increase the total surplus and the procureris payo§.