American Economic Journal:
Microeconomics
ISSN 1945-7669 (Print) | ISSN 1945-7685 (Online)
Strategic Ignorance in Sequential Procurement
American Economic Journal: Microeconomics
vol. 11,
no. 2, May 2019
(pp. 131–72)
Abstract
Should a buyer approach sellers of complementary goods informed or uninformed of her private valuations, and if informed, in which sequence? In this paper, we show that an informed buyer would start with the high-value seller to minimize future holdup. Informed (or careful) sequencing may, however, hurt the buyer as sellers "read" into it. The buyer may, therefore, commit to ignorance, perhaps, by overloading herself with unrelated tasks, delegating the sequencing decision, or letting sellers self-schedule. Absent such commitment, we show that ignorance is not time-consistent for the buyer, but it increases trade. Evidence on land assembly supports our findings.Citation
Krasteva, Silvana, and Huseyin Yildirim. 2019. "Strategic Ignorance in Sequential Procurement." American Economic Journal: Microeconomics, 11 (2): 131–72. DOI: 10.1257/mic.20170076Additional Materials
JEL Classification
- D11 Consumer Economics: Theory
- D81 Criteria for Decision-Making under Risk and Uncertainty
- D82 Asymmetric and Private Information; Mechanism Design
- D83 Search; Learning; Information and Knowledge; Communication; Belief; Unawareness
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