Procurement without Priors: A Simple Mechanism and its Notable Performance

Dirk Bergemann; Tibor Heumann; Stephen Morris

Home/Archive/arXiv

arXiv · 2512.09129

Procurement without Priors: A Simple Mechanism and its Notable Performance

Dirk Bergemann·Tibor Heumann·Stephen Morris

View original source ↗Read source document ↗Export metadata ↓

Abstract

How should a buyer design procurement mechanisms when suppliers' costs are unknown, and the buyer does not have a prior belief? We demonstrate that simple mechanisms - that share a constant fraction of the buyer utility with the seller - allow the buyer to realize a guaranteed positive fraction of the efficient social surplus across all possible costs. Moreover, a judicious choice of the share based on the known demand maximizes the surplus ratio guarantee that can be attained across all possible (arbitrarily complex and nonlinear) mechanisms and cost functions. Similar results hold in related nonlinear pricing and optimal regulation problems.

Explore related subjects

econ.TH cs.GT

Keep this discovery

Explore connections, maps & timelines

BibTeX RIS

Dirk Bergemann, Tibor Heumann, Stephen Morris. 2025-12-09. Procurement without Priors: A Simple Mechanism and its Notable Performance. https://arxiv.org/abs/2512.09129

Cite the original work for its findings. Save a collection to share your selection of sources.

KEEP EXPLORING

Related papers

arXiv2026

Measurement of Trustworthiness of the Online Reviews

Online review platforms shape consumer decisions, yet reported ratings and comments may be unreliable when reviewers behave inconsistently. This paper models online reviews as a sequential choice problem and proposes a formal rationality pattern function that links a reviewer's current review to their revealed preference history. Building on a two-way consistency axiom for choices from nested sets, we derive an object-specific support trajectory and an associated degree measure in [0,1] (Average Propensity to Choose a Pattern, APCP) that quantifies review trustworthiness. The measure is designed to support information updating and reduce asymmetric information by discounting reviews that are inconsistent with past behavior. A worked example illustrates how the approach assigns trustworthiness grades to reviews for different objects and how these grades can complement aggregate rating statistics. Finally, a generalized theory has been established.

econ.TH↗

arXiv2026

The Depth and Reach of Exploitation: Contracting with Endogenously Naive Consumers

Consumers can invest resources to understand and avoid their behavioral mistakes, and their incentives to do so depend on the market consequences of remaining naive. We incorporate this feedback between consumers' cognitive states and market outcomes into a general contracting model. Firms face a trade-off between the depth and reach of exploitation: deeper exploitation raises profit from a naive consumer but induces greater cognitive investment, promoting sophistication and shrinking the exploitable consumer base. This trade-off disciplines exploitation and can cause policies that benefit consumers when cognition is fixed to backfire when cognition is endogenous.

econ.TH↗

arXiv2026

Contracting under Misspecification

This paper studies agency problems when both parties worry that the model linking action to output is misspecified. With observable actions, an optimal contract is linear in output, so performance pay arises solely to share misspecification exposure, the slope reflects the parties' relative robustness concerns, and its allocation is Pareto efficient. With hidden actions, this sharing rule survives and incentives add a nonlinear correction. Misspecification concerns can polarize effort by making intermediate actions impossible to implement. Moreover, ambiguity across competing models has asymmetric effects: uncertainty about desired actions raises the principal's payoff, whereas uncertainty about deviations can lower it.

econ.TH↗